The Beginning of the Great Depression

1. The Beginning of the Great Depression • Price Support • Credit • Alfred E. Smith • Dow Jones Industrial Average • Speculation • Buying on Margin • Black Tuesday • Great Depression • Hawley-Smoot Tariff Act

2. Industries • Railroad, textiles, and steel were facing more competition • Mining and lumber were also facing tough competition and were not needed as much as they once were • Housing market began to fall

3. Agriculture • Prices for wheat and corn rose during the war • Farmers planted more to make a larger profit • Bought new equipment on credit • Annual farm income began to decline • 1919 $10 billion to 1921 $4 billion • Farmers began to default on their loans and banks began to fail

4. Save Us! • Congress tried to create the McNary-Haugen bill that would have allowed for price support • The government would buy surplus crops at a guaranteed price and then sell them on the world market • Cotton, corn, tobacco, wheat • Pres. Calvin Coolidge vetoed the bill twice

5. Deeper Down • Since farmers had more debt they had less money to spend • This had a trickle down effect • Many Americans were buying on credit • Buy now, pay later with interest • When faced with debt, people spent less money in order to pay off debt • Only 5% of the population earned $10,000 or more per year • 70% of the population earned $2500 per year

6. Election of 1928 • Secretary of Commerce Herbert Hoover • Alfred E. Smith • Governor of New York • The first Roman Catholic to run for president • Hoover won based on the past success of his party

7. Stock Market • Some people invested their money in the stock market • The Dow Jones Industrial Average is used as a barometer of the nation’s economic health • Based off of the prices of 30 large firms traded on the NYSE • The market rose steadily through the 20s • About 3% of the nation owned stocks

8. Stock Market cont. • Many people were involved in speculation • Buying high risk stock with a high interest rate • Others were buying on margin • Paying a small percentage of the stock price as a down payment and then borrowing the rest • There was little gov’t regulation of the stock market

9. CRASH!! • Early Sept. 1929 stock prices began to fall • Investors quickly began to sell their stock. • Oct. 24 the market took a plunge • October 29, 1929 Black Tuesday • 16.4 million shares of stock were dumped • People who had bought on margin were left with a huge debt but not product to show for it • Other people lost their savings • By mid-November $30 billion had been lost • Signaled the beginning of the Great Depression

10. The Great Depression • 1929-1940 • The U.S. economy plummeted and unemployment skyrocketed • People began to withdraw all of their money from banks • 1929- 600 banks closed • By 1933 11,000 of the 25,000 had failed • The government did not protect or insure banks

11. The Great Depression cont. • 1929-1932 the GNP was cut in half • $104 billion to $59 billion • 90,000 businesses went bankrupt • Unemployment went from 3% in 1929 to 25% in 1933

12. Hawley-Smoot Tariff • Much of Europe was hit by the Depression as well • The U.S. had difficulty importing European goods • 1930: Congress tried to protect American farmers and manufactures from foreign completion with the Hawley-Smoot Tariff • Reduced the flow of European goods into U.S. • Made things worse: Europe wouldn’t buy American products

13. Causes of the Great Depression • Tariffs and war debt policies cut down the foreign market for American goods • A crisis in the farm sector • The availability of easy credit • Unequal distribution of wealth • The federal government did little to avoid disaster • Hoover encouraged Americans to stay confident