What explains the decline in personal income beginning in 1929?

1. What explains the decline in personal income beginning in 1929? The Stock Market Crash (’29) and Great Depression (‘30s)

2. What were the causes of the Great Depression and how did the depression affect the lives of Americans?

3. Background: • Business Cycle Peak Expansion Recession (Business Slump) *Increase production *Wages high *Decrease Production *Decrease Wages *Layoffs Depression (longer business downturn) Measure of GDP (Gross Domestic Product) Estimated total value of all final goods. What basically determines the ups and downs in the business cycle? SUPPLY and DEMAND

4. Case in Point:Model T Ford Henry Ford’s company mass produces Model T. Assembly line production makes the process quick and affordable. Company makes money, investors make money, workers make money…. WHAT HAPPENS WHEN EVERYONE WHO WANTS A MODEL T HAS ALREADY PURCHASED ONE???? Expansion *Increase production *Wages high + +

5. Case in Point:Model T Ford Henry Ford’s company meets the demand for Model T. Supply meets Demand. WHAT WOULD HAPPEN IF HENRY FORD CONTINUED PRODUCING MODEL T’s AT THE SAME RATE DURING PEAK AS HE HAD DURING EXPANSION? Peak (Supply meets demand) =

6. Case in Point:Model T Ford Henry Ford must reduce production to meet lower demand for Model T. Company does not make as much money, investors do not make as much money, and some workers may be laid off. Recession (Business Slump) *Decrease Production *Decrease Wages *Layoffs -

7. Stock Market measures health of economy / business by buying and selling stock (supply and demand.) Stock- ownership in company. New York Stock Exchange

8. What role does the stock market play in the Business Cycle? STOCK MARKET

9. What role does the stock market play in the Business Cycle? STOCK MARKET

10. What role does the stock market play in the Business Cycle? STOCK MARKET

11. What role does the stock market play in the Business Cycle? STOCK MARKET

12. Price of stocks in the stock market reflects the expectation of shareholders. Expectation / Speculation stock prices high = stock grows or remain high Expectation / Speculation stock prices low = stock goes down Peak Expectation low and people stop buying Expectation high and people buy

13. Causes and Effects of • Great Depression ***Over speculation- Stocks overvalued • Over speculation of stocks • using borrowed money that • could not be repaid when • the stock market crashed • in 1929. *uneven distribution of wealth *80% people had no savings *installment buying-Debt *stock on margin-borrowed $ *over production *laissez faire gov’t Economy 1920s *optimistic *prosperity *wages high *confidence in business Oct. 29, 1929 Black Tuesday GREAT DEPRESSION

14. The trading floor of the New York Stock Exchange just after the crash of 1929. In a single day-Black Tuesday- a record sixteen million shares were traded and thirty billion dollars vanished into thin air.

15. Causes and Effects of • Great Depression • The “ripple effect” of the • stock market crash.

16. Many investors lost everything in the stock market Income drops 40%

18. 86,000 businesses fail 13 million workers left unemployed Typical scene outside an employment agency.

19. Local missions sponsor soup kitchens to feed the unemployed.

21. How did massive unemployment impact the nation’s psychological state?

22. Feelings of shame, depression, hopelessness.

24. Federal Reserve failed to prevent widespread collapse of banking system leading to severe contraction in the nation’s supply of money in circulation. “Run on the Bank” (1933)

26. Farmers worst hit by Great Depression. New machinery increased crop yields, but surpluses meant crop prices remained low— Mortgaged farms are lost.

28. (1933-1934) Farmer’s plight in Great Plains made worse by drought and the consequent dust storms-- “Dust Bowl.”

29. “Black Blizzard”

33. Consumed by “Dust Bowl”- “dust pneumonia,” brown snow reaches northeast.

34. 25% of farmers migrate out of “Dust Bowl.” “Okies” escape the dust storms and move to California. (Steinbeck’s novel, Grapes of Wrath)

35. Cause and Effect: Graphic Practice CAUSE EFFECT

36. Cause and Effect: Graphic Practice CAUSE EFFECT

37. Cause and Effect: Graphic Practice CAUSE EFFECT

38. Cause and Effect: Graphic Practice CAUSE EFFECT

39. Cause and Effect: Graphic Practice CAUSE EFFECT

40. Cause and Effect: Graphic Practice CAUSE EFFECT

42. German post-WWI Inflation- 1 dollar worth 100,000 marks Unable to pay war reparations. Poor in streets of Germany

43. Dawes Plan and Young Plan- U.S. loans money to Germany to pay reparations, ends after stock market crash. What is strange about this financial arrangement?

44. III. Limited role of government: Hoover Herbert Hoover (R) (1929- 1933) Overall view: Voluntary aid (neighbor helping neighbor) Gov’t help would destroy people’s self respect Insisted things would get better soon… “no one is actually starving” What is the problem with Hoover’s approach?

45. Bad Decisions: Tariff Act of 1930 or Hawley-Smoot Tariff- High protective tariff that produced retaliatory tariffs in other countries, strangling world trade. Reconstruction Finance Corporation (RFC)- Loans to banks and business, appeared as though Hoover only willing to help the rich.

46. People blame Hoover for Great Depression: Shantytowns = Hoovervilles Empty pockets = Hoover flags Newspaper = Hoover blankets Hooverville

47. Hoover’s reputation gets worse…. “Bonus Army” Incident- 20,000 WWI vets protest in D.C. They want pensions. There is a few violent skirmishes and army is called out to drive them out. Write a letter to President Hoover explaining how you feel about the “Bonus Army” incident and what you think he should do to solve the problems of the Great Depression.

48. Election of 1932 Hoover (R) FDR (D) Why did FDR win by such a wide margin in 1932? FDR offered a NEW DEAL for the American people.

49. (Jan-March 1933) Wait for FDR to come into office…