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Great Depression. Warnings of an unsound economy. Uneven prosperity. uneven dist. of wealth 0.1% at top owned as much as bottom 42% of American families (42% below poverty line )
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Warnings of an unsound economy • Uneven prosperity
uneven dist. of wealth • 0.1% at top owned as much as bottom 42% of American families (42% below poverty line) • of the 58% above the poverty line, most fell into the middle class category - they were not wealthy; they had jobs b/c of the industrialization & consumerization of the American market place • this middle class depended on their salaries and when productivity declined they lost their jobs • and b/c of low savings, they had to cut back on their purchases • this decline in consumption among the middle class ruined the whole country
Buying with credit Playing the stock market Overproduction and under-consumption Trouble for farmers Trouble for workers
The stock market: • the public invests in co. by purchasing stocks; in return for this they expect a profit • b/c of booming 1920's economy, $ were plentiful, so banks were quick to make loans to investors • also investors only had to pay for 10% of the stock's actual value at time of purchase • this was known as BUYING ON MARGIN, and the balance was paid at a later date
this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck • b/c of all this buying & selling, stock value increased (Ex: G.E stock $130 $396/share) • this quick turnover didn't aid cos. they needed long term investments so they could pay bills (stock value was like an illusion) • unscrupulous traders would buy and sell shares intentionally to inflate a given co.'s stock value • all of this gave a false sense of security/confidence in the American market
Stock Market • Purpose: business owners sell portions (shares) of their companies to investors. • High today=higher tomorrow • Buy as much as possible • Buying on margin • No way to repay (decline) • Speculation • Mass selling
Banks • People deposit • banks make loans to stockbrokers • stockbrokers loan money to individual investors • individual investors unable to sell stocks • Unable to pay back money
Black Tuesday • Sept 1929: stock prices peak then decline • People begin to sell • Tuesday October 29: bottom fell out of stock market • Signaled beginning of Great Depression
beginning in Oct. 1929, investors’ confidence dropped, leading to a market collapse • all tried to sell at once and bottom fell out of market = panic selling… (many bankruptcies as banks called in loans) • only a tiny minority of people traded on the stock exchange, but they possessed vast wealth, and the crash had a ripple effect on the economy
Hawley- Smoot Tariff • Europe also affected by crash • US no longer buy imports • Congress passed law to protect Amer businesses from foreign competition by raising tariff on all imports • Europe raised tariff on all US imports • Caused slump in economyin
Causes of Great Depression • Tariffs and war debt polices that cut down the foreign market for Amer goods • Crisis in the farm sector • Availability of easy credit • Unequal distribution of wealth
American Families • Unemployment • African Americans/Latinos • Women • Men • Suicide • Children • Marriage/Birth Rate • Soup Kitchens/Bread Lines
Natural Disasters • Dust Bowls • Great Flood of 1936
Herbert Hoover - believed that the economy should be allowed to function with minimal intervention • Govt should not take care of its’ people, but people should take care of themselves • People against Hoover b/c felt he caused depression and not helping situation • Hoovervilles
Hoover Cont • Boulder Dam • Federal Home Loan Bank Act • Reconstruction Finance Corporation
Bonus Army • Pay WWI soldiers everyday they served during war • Govt not pay until 1945 • Vets wanted/needed money now • Congress didn’t pass Patman Bill • Vets refused to leave; Hoover ordered their removal
