The 1929 Stock Market Crash and the Great Depression Ch 14-15-16 The Causes of the 1929 Stock Market Crash Economy appeared healthy in the 1920’s “Wonderful Prosperity” – normal people doing well, stock market Welfare Capitalism – employers gave workers benefits to keep strikes away Signs of Economic Danger Uneven Prosperity Personal Debt Playing the Stock Market Too many goods, Too Little Demands Trouble for Farmers and Workers Economies run in cycles ** Up cycles occur when capital and opportunity exist ** Down cycles occur when either capital or opportunity or both are not present The Market Crashes Black Thursday – October 24,1929 Stocks fell slowly from September on, major fall on 10/24 Business and Banking leaders told investors not to panic President claimed nation’s businesses were on “a sound and prosperous basis” Black Tuesday To stop panic, bankers pooled their money and bought stock Too little too late – on 10/29 the market crashed ($30B losses in one day) The Ripple Effect Early on, only heavy investors hurt by crash/Some lost EVERYTHING Within a short time, the effects were widespread Soon, millions who never owned stocks were effected Ripple Effects (downward spiral) Risky Loans to Banks (banks earn profits by loaning money out. In this era, banks loaned to Consumer Borrowing (consumers borrow from banks, stores and couldn’t pay back) risky businesses) Bank Runs (Fearful of failure, people rushed to withdraw their money from banks) Bank Failures (banks didn’t have enough money on hand to give money to all their investors) Savings Wiped Out Cuts in Production (If bank failed, savings wiped out, no safety net) (without being able to borrow, businesses cut production of goods) Rise in Unemployment (business cutbacks meant people were laid off) Further Cuts in Production (without jobs, people stopped buying goods, causing further cutbacks) DOWNWARD SPIRAL – economy spiraled down and down causing an “economic contraction” – a decline in goods and services produced. A large contraction is called a DEPRESSION and in the 1930’s, the United States was in a depression - THE GREAT DEPRESSION Impact on Workers and Farmers Factories thru out the country cut back or shut down, laying off workers Others had hours cut or pay cut Henry Ford shut down factories (75,000 workers let go) Other businesses cut back or closed as unemployed workers had no money to spend Prices farmers got for crops so low they couldn’t break even Formerly wealthy families laid off their servants (one of few jobs for minorities) Gross National Product (GNP) dropped by 50% DOWNWARD SPIRAL Impact on the World By 1930’s, banks, manufacturing and trade make world interdependent Europeans depended on US for investment money and US markets After WW1, US insisted England and France pay back money loaned them during the war. England and France used money from Germany to pay back these debts When US companies quit investing in Germany, it couldn’t make reparation payments, thus England and France couldn’t pay back US This was another hit to US economy DOWNWARD SPIRAL Underlying Causes of the Depression The Stock Market Crash DID NOT cause the Great Depression. It was just a part of bigger economic problems AN UNSTABLE ECONOMY – Wealth was unevenly distributed (a few controlled too much of the money) Those with control of the money quit spending when the market crashed Industry quit producing goods when people quit buying things Farmers/workers at the bottom during the good times of the 1920’s were hit hard OVERSPECULATION Goods and Stocks bought on credit/margin now created an unpayable debt Stock Market was based on borrowed money and overinflated values GOVERNMENT POLICIES Monetary policies made things worse Federal Reserve policy of restricting money to discourage lending Tariffs to encourage buying US made products Interest rates cut to spur economy kept prices down/no profit for companies Social Effects of the Depression Most thought Depression would not last very long, could ride it out Those who would never have thought to ask friends, family or the government for money found they had no other choice POVERTY SPREADS Most had saved some money for a “rainy day” (lost when banks failed) Most felt secure in their jobs (lost when company cut back or closed) But that all changed with the Great Depression HOOVERVILLES – so many lost their jobs/homes, that homeless camps sprung up all over the country (15,000 in NYC alone). Nicknamed these camps “hoovervilles” after President Hoover as an insult to him Many kept moving, looking for work. These hobos or drifters rode the rails from town to town chasing non-existent jobs More than 1 million hobos/drifters in 1933 Social Effects of the Depression FARM DISTRESS – Prices went from low to lower Unable to pay their mortgages, farmers lost their farms to the banks Banks would sell at auctions (penny auctions) In protest of low prices and bank practices, farmers destroyed their crops, dumped their milk, broke their eggs Nation was shocked at protest, when people were literally starving to death THE DUST BOWL Many who tried to keep farming were destroyed by the “DUST BOWL” 10 years of drought made farming impossible Environmental catastrophy so bad that dust blew into “black blizzards” 60% of farmers lost farms. Dust Bowl migrants took off to find work Many head out west to California’s agricultural belt. Some jobs, but not nearly enough for those who needed work Poverty Strains Society Serious physical and psychological toll taken on entire country Unemployment or fear of losing job caused great anxiety Many depressed, many considered suicide, some did take own lives IMPACT ON HEALTH President Hoover stated, “No one has starved”, but some did. Thousands of others went hungry, got sick, lost shelter Many grew food on whatever land they could (relief gardens). Used food to barter for things they had no money to buy. Others sold food on street corners Others dug through trash hoping to find some scrap of food STRESSES ON FAMILIES As they lost homes, many families moved in together As they lost jobs, they gave up small extras (movie ticket, treat) Men felt like failures because they could not provide for their families Most ashamed, too embarrassed to ask for help. Some men left their families to try to find work or just to escape Women had to worry about feed their children. Working women accused of stealing men’s jobs. Many placed fired women or refused to hire them, even if they were the only one supporting the children DISCRIMINATION INCREASES Minorities, already hurting, were first fired/laid off Faced hostilities if they had a job (stole from white men) Black unemployment was over 56% Government relief programs rarely benefitted people of color Justice system ignored rights of minorities Scottsboro Boys – 9 black youths riding the rails accused of raping 2 white women Without chance to get an attorney, convicted and sentenced to die After many years of fighting, convictions overturned (Legal Defense Fund) Surviving the Great Depression AMERICANS PULL TOGETHER Farmers stick together Penny Auctions – States passed laws suspending foreclosure sales (fearing violence) Young people ride the rails Young left home (to decrease burden) and road the rails looking for work/adventure Hobo life often dangerous – symbols left to help direct Seeking Political Solutions Many saw capitalism as broken – needed a new system Communism & Socialism attract attention but not votes Depression Humor Hoovervilles, hoover blankets, hoover flags Babe Ruth criticized for taking $80,000 salary (more than president). He is quoted as joking “I had a better year” Signs of Change Looking back, we now know WW2 brought the US out of the Great Depression, but at the time, Americans looked for any sign that things were getting better PROHIBITION REPEALED - 21st Amendment ratified in 1933 EMPIRE STATE BUILDING built – NY Governor FDRoosevelt used this as a symbol of better things to come. It created jobs and the city of New York got a beautiful building that set them apart THE END OF AN ERA – as the 1930’s drug on, it became obvious that the Roaring 20’s era had come to an end (good and bad) Al Capone arrested and jailed for tax evasion Babe Ruth retired Lindberg baby kidnapped and killed Hoover’s Strategies Hoover was a believer in “laissez faire” government. He believed the economy would correct itself, if left alone Hoover believed the US economy was sound enough to withstand the Stock Market Crash and other economic issues Business and Government leaders also preached the idea that the economy would recover soon, and to be patient VOLUNTARY ACTIONS FAIL – Got business leaders to agree to keep wages the same at first, but to stay in business, most would eventually lay off workers and/or cut their wages Public began to blame Hoover for the Great Depression (GD) His unwillingness to intervene angered those hurt by the GD The Government Acts – finally TOO LITTLE TOO LATE Agricultural Marketing Act – designed to stabilize farm prices Failed miserably – lost $150 million dollars Republicans crushed at midterm elections Government spending on public projects went up (jobs) Hoover Dam Hawley Smoot Tariff – highest import tax in US history (to keep Americans buying American made products) Hoover suspended war loan repayments. European economies still fall Reconstruction Finance Corporations Government credit to large industries to keep them running Government loans to banks to keep them open and lending money Home Loan Act – lowering loan rates, refinancing existing loans Hoover’s Unpopularity Grows Hoover insisted STATE and LOCAL governments handle relief efforts Hoover believed direct relief would damage a person’s self respect Fairly or not, most people blamed Hoover for their problems Private Charities opened – not nearly enough help for those in need VETERANS MARCH ON WASHINGTON WW1 Veterans had been promised a BONUS in 1945 20,000 jobless, homeless vets marched on Washington demanding bonus NOW Hoover sent in troops to keep order/peace General Douglas MacArthur decided to use force to clear out marchers US Vets faced their own army, many injured HOOVER and US horrified at military action Hoover took responsibility, final “nail in his coffin” Great Depression Test Essays 1) The Great Crash of 1929 caused as country-wide and world-wide “ripple effect”. Explain this “RIPPLE EFFECT”. 2) Compare the 2 candidates for president in 1932. How did their beliefs in government action as a way to deal with the Great Depression differ? EXPLAIN 3) Identify 2 actions taken by Franklin D. Roosevelt to try to help those impacted by the Great Depression. Explain HOW those actions were intended to provide aid to those in need. Alphabet Agencies Use your book (p. 536-544) to find 10 alphabet agencies Give their letters Give their worded title Explain what they were designed to help A NEW DEAL for America Franklin D. Roosevelt (FDR) pledged a “New Deal” for America Governor of New York – built image on hope (Empire State Building) Believed it was the responsibility of those with wealth to use their efforts to help those in need Crushed Hoover in 1932 elections Hoover asked voters to give him/his policies more time to work. That the Great Depression would come to an end and the US would rise us again FDR promised a “NEW DEAL” for America. He promised the government would act to help those in need. The government would act to spur the economy and bring the US out of the Great Depression FDR CRUSHED Hoover in 1932 election (democrats gained control over both housed of Congress) FDR had a “MANDATE” from the voters to use the government to stop the Great Depression and provide aid for those in need Actions of FDR years First 100 Days (Alphabet Agencies) Stabilizing Financial Institutions (Bank Holiday, FDIC, SEC, off gold standard) Provided Relief and Created Jobs (FERA, CWA, CCC) Regulated the Economy (NIRA, NRA, PWS) Assisted Home Owners and Farmers (AAA, FHA, HOLC) The Tennessee Valley Authority (TVA) 2nd New Deal New and Expanded Agencies (AAA, FSA, WPA) Rural Electrification (REA) New labor Legislation (Wagner Act, NLRB) Social Security Old Age Pensions Unemployment Insurance Aid for Dependent Children and the Disabled New Deal missed some Minorities New Deal programs, especially in South, enforced segregation New Deal programs (skilled jobs) were not offered to minorities Government did little, nothing to stop discrimination Unemployment was well over 50% for African Americans Women Relief programs not aimed at women, most excluded women Jobs women could get were not provided for in New Deal programs FDR did appoint minorities and women to key government positions, the first president to do this Critics of the New Deal Then and now, many believe the government actions taken during the Great Depression not only did not end it, but lengthened DID TOO MUCH - many in FDR’s day argued that the government actions went way too far. Many, especially the wealthy, saw much of New Deal as “socialist” 2nd New Deal passed the Wealth Tax Act that raised the tax rate on those who made more than $50,000 per year Social Security Act took money from successful workers and gave it to those who were not successful DID TOO LITTLE – many FDR supporters wanted him to push even further in redistributing the wealth of the nation Sinclair Lewis (the Jungle) saw chance to equalize things Many believed that by redistributing the wealth, poverty would end Ch 15 Essays 1) The Great Crash of 1929 caused as country-wide and world-wide “ripple effect”. Explain this “RIPPLE EFFECT”. 2) Compare the 2 candidates for president in 1932. How did their beliefs in government action as a way to deal with the Great Depression differ? EXPLAIN 3) Identify 2 actions taken by Franklin D. Roosevelt to try to help those impacted by the Great Depression. Explain HOW those actions were intended to provide aid to those in need.