THE GREAT DEPRESSION Chapter 11. Appearances Versus Reality GGross National Product (GNP): total...
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Transcript of THE GREAT DEPRESSION Chapter 11. Appearances Versus Reality GGross National Product (GNP): total...
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THE GREAT DEPRESSION
Chapter 11
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Appearances Versus Reality
Gross National Product (GNP): total value of goods and services produced by a nation ROSE 30% Explosive growth of
automobile FEELING of prosperity
encouraged spending
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
STOCKS: OWNERSHIP IN A COMPANY If corporation
succeeds, value rises Corporation doesn’t
do well, loses value Stock market
performed spectacularly
Attitude was stocks wouldn’t go down
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
FAITH IN BUSINESS AND GOVERNMENT Prosperity of 1920s
showed triumph of American business
“chief business of America is business” Calvin Coolidge
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
HERBERT HOOVER Elected in 1928 Impressive record
of public service Businesslike
administrator
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
DISTRIBUTION OF WEALTH: Small number of
people truly prospered Wealthiest 1% income
rose 60% Most workers saw 8% 70% of farmers didn’t
make enough Many reaching credit
limits
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
GNP = prosperity Stocks couldn’t
fail Faith in Business Herbert Hoover
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Appearances Versus Reality
GNP = prosperity Stocks couldn’t
fail Faith in Business Herbert Hoover
CREDIT People bought
stocks on credit Made prices rise
sharply
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
GNP = prosperity Stocks couldn’t
fail Faith in Business Herbert Hoover
BUYING ON MARGIN Investor wants 100
shares in a company $10/share = $1,000 Only pay for a
portion $500 Borrow other $500
from broker Pay off loan once
stock sold
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
GNP = prosperity Stocks couldn’t
fail Faith in Business Herbert Hoover
BUYING ON MARGIN
As enthusiasm for investing grew, brokers required lower margins for purchases
Gave bigger loans 1929: buy stock
for 10% of cost
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
GNP = prosperity Stocks couldn’t
fail Faith in Business Herbert Hoover
BUYING ON MARGIN If stock rose to $15, the
$1,000 investment would rise to $1,500
The investor would get back original $500, repay $500 loan, and still have $500 profit
If stock fell to $5/share the sale would only be $500 which would have to be used to sell off the loan. No profit, out original $500 investment
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
GNP = prosperity Stocks couldn’t
fail Faith in Business Herbert Hoover
BUYING ON MARGIN MARGIN CALL:
Broker could force investors to repay loans if value fell
You’re in big trouble if your stock’s value falls
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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Appearances Versus Reality
GNP = prosperity Stocks couldn’t
fail Faith in Business Herbert Hoover
THE FEDERAL RESERVE Nation’s central bank Takes actions and sets
policies to regulate nation’s money supply
Keeps economic activity healthy
Unable to keep business from loaning investors money
APPEARANCES: PROSPERITY
REALITY: ECONOMIC WEAKNESS
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•Stock Market reaches it’s high point•Many people began to recognize signs of trouble•Sales began sagging•Rumors spread that big investors were getting ready to take money out of market
September 3, 1929
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•Nervous investors began selling stocks•Others noticed increased activity and joined selling•Few people willing to buy millions of stocks flooding market, stock market prices plunged, triggering greater panic to sell•Toward the end of the day, a number of leading bankers joined to buy stocks to prevent further collapse
Thursday, October 24, 1929
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•Market returned to normal•Some stocks gained value
Friday, October 25, 1929
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•Good feelings from Friday gone•Market sank like a stone
Monday, October 28,1929
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•Panic completely overtook the markets•Investors dumped more than 16 million shares•Affected strongest companies•BLACK TUESDAY•Stock market lost $16 Billion
Tuesday, October 29, 1929
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View image of man with car, read insetsSummarize effects of crash in graphic organizer
326-327
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The MOST severe economic downturn in the history of the US (and the World)
25% Unemployment 5,000 Banks closed Hundreds of Thousands Homeless
Great Depression (1929-1941)
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BANK RUNS: nervous depositors rushed to withdraw savingsThousands of Banks closed forever
Bank Failures
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Reaches 25%Businesses go out of business, people lose jobs, stop shopping, more businesses go out of business
UnemploymentBusiness
es Closes
People out of work
Stop Shoppin
g
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People lose jobs, houses, possessionsHOBOES: homeless who ride the rails looking for workHOOVERVILLES: pop-up villages of shacks for homeless
Homelessness
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Angry at the banksShame at losing everything
Emotional Toll
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The Dust Bowl
By 1931 much of the Great Plains were in a drought (period of below-average rainfall)
DUST BOWL Farmers had cut down all the grass to plant
crops Much of the earth lay bare to the elements Wind Storms would come up and blow dust
for miles OKIES: farmers who fled the Great Plains
West to look for work (named after Oklahoma)
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Hoover Responds
RUGGED INDIVIDUALISM: It’s up to the people to pull themselves up, not the federal government
HOOVER DAM: example of how businesses should cooperate
COOPERATIVES: farmers buy together to get lower prices
SMOOT HAWLEY ACT: Raised prices for imported goods (hoped to make Americans buy US goods) Slowed trade
Raised taxes to balance budget
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Franklin Delano Roosevelt (FDR)
Wealthy family from New York New York Senator Democrat Married to Eleanor Roosevelt FIRESIDE CHATS: radio
addresses – felt like family HUNDRED DAYS: period of
critical government activity where FDR sprung into action
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The New Deal – The Three Rs
NEW DEAL: Plan to fix the Economy RELIEF: for those suffering
effects of GD RECOVERY: of the depressed
Economy REFORMS: to prevent another
GD DIRECT RELIEF: Federal
Government directly helping individuals during the Great Depression
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New Deal Programs
CCC AAA NIRA PWA TVA EBA NLRB FHA
CWA WPA SEC FDIC REA FSA SSA
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•Temporarily closed banks to find problems in banks and fix them•Created by the Glass-Steagall Act•(first Fireside Chat explained this)•Reform
Emergency Banking Act
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Protected depositors money in case banks closedReform
Federal Deposit Insurance Corporation
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Gave men 21+ jobs planting trees and building parksRelief
Civilian Conservation Corps
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Gave farmers SUBSIDY to plant less to raise pricesRecovery
Agricultural Adjustment Act
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Hired artists to document and improve the Great Depression (paintings, pictures, writings, etc)Relief
Works Progress Administration
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Brought affordable electricity to thousands by building dams and introducing new farming techniquesRecovery
Tennessee Valley Authority
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Provides a pension to retired workers 65+Relief
Social Security Act
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During the Great Depression
Art & Culture
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Art
Grant Wood:
“American Gothic” (1930)
Shows American ideals – hard work, domesticity
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Movies
Gone with the Wind(1939)idealizes the South during the Civil War
Wizard of Oz(1939)Teaches young girl that there is “no place like home”