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The Great Depression Begins Chapter 14

The Great Depression Begins Chapter 14. Section 1 – The Nation’s Sick Economy Section 2 – Hardship and Suffering During the Depression Section 3 – Hoover Struggles with the Depression. http://history1900s.about.com/library/photos/blyindexdepression.htm. Ch. 14 Sec. 1 Objectives.

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The Great Depression Begins Chapter 14

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  1. The Great Depression BeginsChapter 14 Section 1 – The Nation’s Sick Economy Section 2 – Hardship and Suffering During the Depression Section 3 – Hoover Struggles with the Depression http://history1900s.about.com/library/photos/blyindexdepression.htm

  2. Ch. 14 Sec. 1 Objectives • To summarize some of the problems threatening the American economy in the late 1920’s. • To describe the causes of the stock market crash and of the Great Depression. • To explain how the Great Depression affected the economy in the United States and throughout the world.

  3. The Nation’s Sick EconomySection 1 • 5 Effects of the Great Depression on the American Way of Life and Government • Changed American Way of Thinking • Government took a more active role in peacetime economies • Government assumed responsibility for relief • Created the Modern Presidency • Created the Welfare State

  4. The Rise and Fall of the Stock Market • Stock Market appeared very stable and strong during the 1920’s. • The # of stocks traded increased steadily. • Use of Broker’s Loans increased. • Money borrowed from banks by stock brokers in order to purchase stock. • The stock is used as collateral. • Property pledged to guarantee a loan. • Some people were worried that stocks were inflated, but most didn’t see any problems.

  5. The Bull Market • In March of 1928, a large group launched a buying campaign on General Motors and Radio Corporation of America. Prices soared. • What is it called when the market prices are rising? • Bull Market - Is this a normal market? • NO

  6. Impact of Speculation • Types of Speculators – (Very Dangerous) • Bulls • Those who buy in anticipation of rising prices • Those who buy stock when prices are rising and then sell it for a profit when the prices are higher. • Bears • Those who sell in expectation of falling prices • Investors • Those who buy stock as an investment for long terms and who collect dividends. • Who Dominated the Stock Market in the 1920’s?

  7. Buying on Margin • Technique used by many speculators. • Stock Brokers use a small percent (10-25) of their own money and borrow the rest from a bank. • Broker’s Loans are also Call Loans. • Loans that can be terminated or called at any time by the lender or borrower. • Meant to be short-term. (A few weeks or months)

  8. Black Tuesday • Summer of 1929 the London Stock Market Crashed • Speculators begin to panic and sell stock • Prices Fall • Speculators begin to panic and sell stock • Prices Fall • Tuesday, October 29, 1929 the bottom fell out of the market and it crashed.

  9. Dow Jones Industrial Average • See Page 467 and 468 • Dow Jones Industrial Average – the most widely used measure of the stock market’s health. • Measure based on the stock prices of 30 representative large firms traded on the New York Stock Exchange. • Major Moments • Oct. 28-29, 1929 Dow loses ¼ of its value in famous Black Tuesday Crash • Jan. 1987 Dow breaks 2000 • Oct. 19, 1987 Stock Market Crash on Black Monday • July 16, 1997 Dow reaches 8000 • March 29, 1999 Dow reaches 10,000 • Oct. 2007 All time close at over 14,164 http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average History of the Dow Jones @ http://www.mdleasing.com/djia.htm

  10. Economic Conditions 1929-1933 • National Income Fell from 87.8 Billion to 40.2 Billion • Stock Dividends decreased 56.6% • Salaries Decreased 40% • Manufacturing Wages Decreased 60% • 25% Unemployment Rate

  11. Republicans – Herbert Hoover Sec. of Commerce Headed Food Adm. During WWI Mining Engineer Democrats – Alfred E. Smith Career Politician 4 time Governor of New York 1st Roman Catholic to run for President Election of 1928 http://teachpol.tcnj.edu/amer_pol_hist/thumbnail340.html http://en.wikipedia.org/wiki/Herbert_Hoover http://en.wikipedia.org/wiki/Al_Smith View Hoover Video @ http://www.hippocampus.org/US%20History%20II

  12. Causes of the Great Depression • Stock Market Crash • Slowdowns in Key Industries • Agriculture • Construction • Automobile • Uneven Distribution of Wealth • High Production of Goods / Lack of Demand • People Living on Credit • Government Policies • Cut Taxes on Wealthy • Cut Loans to Foreign Counties • Raised Protective Tariffs (Hawley-Smoot Tariff Act) • Non-Enforcement of Anti-Trust Laws • Banking System • Weak Banking System using funds to invest in stock market

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