Unit VIII Boom Times and Challenges

1
Unit VIII Boom Times and Challenges

• Chapter 25 The Great Depression
• Section 1 The End of Prosperity

2
The End of Prosperity

• The Big Idea
• The collapse of the stock market in 1929 helped
  lead to the start of the Great Depression.
• Main Ideas
• The U.S. stock market crashed in 1929.
• The economy collapsed after the stock market
  crash.
• Many Americans were dissatisfied with Hoovers
  reaction to economic conditions.
• Roosevelt defeated Hoover in the election of 1932.

3
(No Transcript)
4
The Appearance of Prosperity

• Strong Stock Market
• The stock market, where people buy stocks, or
  shares, in companies, performed very well in the
  1920s, with stock values sharply increasing each
  month.
• The value of stocks traded quadrupled over nine
  years.
• The steep rise in stock prices made people think
  the market would never drop, and more ordinary
  Americans bought stocks than ever before.
• This encouraged more investors, who borrowed more
  money(on margin), which increased the number of
  shares traded and caused the price of stock to go
  up.
• The number of shares traded rose from 318 million
  in 1920 to over 1 billion in 1929.
• Business leaders said everyone could get rich
  from stocks.

• Strong Economy
• Between 1922 and 1928 the U.S. gross national
  product, or total value of all goods and
  services, rose 40 percent.
• Though farmers and some other workers didnt
  benefit, the overall economy performed well,
  especially for automakers and those who made auto
  parts.
• 1 on 5 Americans owned a car in 1929
• Corporation profits were on the rise.
• Overall unemployment remained low, averaging
  around five percent between 1923 and 1929.
• Union membership slowed as employers expanded
  welfare capitalism programs, or employee
  benefits.
• This feeling of prosperity encouraged workers to
  buy new products and enjoy leisure activities
  such as movies.

5
(No Transcript)
6
Main Idea 1 The U.S. stock market crashed in
1929.

• 1920s stock market was a bull market, or one with
  rising stock values.
• Many people began to buy stocks.
• Some who could not afford the stocks full price
  began buying on margin, or purchasing stocks on
  credit.
• Few considered what might happen if the bull
  market turned into a bear market, or one with
  declining stock prices.
• Stock prices peaked in the summer of 1929.
• Prices started to drop.
• Frightened investors rushed to sell their stocks
  in order to pay off their loans.

7
Credit and the Stock Market
8
Black Tuesday

• In September 1929, total value of all stocks was
  87 billion.
• On Thursday, October 24, panic hit the stock
  market.
• Within three hours the market lost 11 billion in
  value.
• On Monday, October 28, prices dropped again.
• On Tuesday, October 29, the stock market crashed.
• So many people wanted to sell their stocks, and
  so few wanted to buy, that stock prices
  collapsed.
• Became known as Black Tuesday
• By November 1929, 30 billion in stock value had
  disappeared.

9
(No Transcript)
10
(No Transcript)
11
The Stock Market Crashes

• Identify By what name did the day the stock
  market crashed become known?
• Recall When the market crashed, what did most
  stockholders want to do with their stocks.
• Evaluate If you owned stock, which type of
  market would you want, bull or bear? Why?

12
Main Idea 2 The economy collapsed after the
stock market crash.

• Banking crises after the stock market crash
• In 1929 banks had little cash on hand and were
  vulnerable to runs, or a string of nervous
  depositors withdrawing money.
• A run could quickly drain a bank of all its cash
  and force its closure.
• Public panic followed
• Effects on business
• Unemployment soared to more than 4 million
  workers.

13
Causes of the Great Depression

• Business cycle

• Governments monetary policy- Federal Reserve and
  Money system

• Overproduction American businesses were
  producing far more goods than people were
  consuming.

• Uneven distribution of wealth millions of
  Americans did not earn enough to afford expensive
  new products.

• Declining world trade Europe, still recovering
  from the war, could not afford to buy American
  goods or to pay the high tariffs required to sell
  their own goods in the United States.

14
Other Causes of the Great Depression

• 1) The Stock Market Crash of 1929- a trigger.
• 2) Speculation in Stock Market- buying on margin
  and cheap money
• 3) Banking crisis.
• 4) Republican Party
• 5) Lack of diversification.
• 6) Post war deflationary procedures.
• 7) The Credit structure.

15
(No Transcript)
16
Effects of the Crash
Effects
Individuals
Cause
Stock Market Crash
17
Effects of the Crash

• Effects on Individuals
• Investors ruined, huge fortunes disappeared
• Margin buyers- had to pay back the margin call to
  brokers and sold for less then they paid.
  Causing loss of savings and still owed money.

18
Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
19
Effects of the Crash

• Effects on Banks- crash triggered a bank crisis
• Not all Americans invested but most all had money
  in savings.
• Runs on the banks to get deposits out- Hundreds
  of banks failed.
• By 1933- bank failures wiped out billions of
  dollars of savings, add this to the crash and
  things got worse.
• Banks had no deposit insurance and little cash on
  hand.
• Banks had made investments themselves in the
  stockmarket- these are now losses
• Loans to stockbrokers became losses.

20
Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
Business
21
Effects of the Crash

• Effects on Business-
• money scarce, banks and investors unwilling or
  unable to provide the money for business to grow
  and expand.
• Consumers cut back spending and companies began
  to lay off workers.
• Unemployed workers make less money, less
  purchases and companies again lay off.
• Wages dropped by over 4 Billion. Consumers
  stopped spending.

22
Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
Business
Overseas
23
Effects of the Crash

• Effects overseas- began in U.S. but rippled over
  seas.
• U.S. banks called in loans to foreign countries
  crippled from WWI.
• Foreign countries exported less to U.S. due to
  low buying power there. And foreign companies
  began to lay off workers.
• Governments around the world raised the tariffs
  on imports to protect their industries.

24
The Economy Collapses

• Recall What two things caused banks to close?
• Explain How did people lose their life savings?
• Identify Cause and Effect How did the stock
  market crash affect banks and businesses?

25
Development of the Great Depression

• Farm Failures
• Unemployment reduced Americans ability to buy
  food and people went hungry
• Farmers overproduced, surpluses went up and
  prices went down.
• Lower prices means lower income for farmers.
• Farmers borrowed for land and equipment, now were
  unable to repay loans.
• 1933- over 364,000 foreclosures- Foreclosure
  occurs when a lender takes over ownership of a
  property from an owner who has failed to make
  loan payments.

26
(No Transcript)
27
(No Transcript)
28
The Economy Collapses

• Recall What was the national employment rate
  before and after the stock market crash?
• Identify What percentage of Americans earned
  1/3rd of all income?
• Elaborate How did World War I affect the
  American economy?

29
What did Hoover do?

• Traditional Approach to a depression- Cut
  Government Spending and let the Depression burn
  it self out- this will get rid of the rottenness
  in the system.
• Hoover did not sit still
• He called on states, cities, and all private
  charitites to feed the hungry. Resisted giving
  direct assistance to individuals
• Brought business and labor leaders together.
• Cut his own salary by 1/5th
• Cut taxes- did little good
• Public works jobs- Created Reconstruction Finance
  Corporation that loaned 1.2 billion to financial
  institutions

30
Nations Response to Hoover

• Losing favor
• Hoover was optimistic- but the worst was yet to
  come.
• He still refused direct aid.
• But he did give aid to banks and businesses but
  not individuals.
• Bonus Army- 15,000 set up camp
• 1932- WWI Veterans march on Washington to demand
  their bonus 1.25 for each day overseas- to be
  paid in 1945
• They need the money now
• Hoover sent out the troops to clear them out-
  Violence
• Voter Reaction- 1930 Republicans began to lose
  seats in Congress.

31
Hoovervilles
"Hoovervilles" sprang up across America in the
1930s. They took their name from President
Herbert Hoover who was in office when the Great
Depression began. "Hoovervilles" were clusters of
shacks where destitute people had to live. They
were made up of packing crates, abandoned cars,
and other cast off scrap. They were shanty towns
that were located outside of major cities.
32
The Human Impact of the Great Depression
33
Hoovers Reaction

• Identify What groups did Hoover believe should
  give assistance to the poor?
• Explain How did government programs give
  assistance to the nation under Hoover?
• Elaborate What would you have done differently
  about the Bonus Army encampments?

34
The Election of 1932

• Americans blamed President Hoover for the
  countrys economic woes.
• Franklin Delano Roosevelt won the Democratic
  Partys nomination.
• He was related to Theodore Roosevelt.
• He survived polio.
• He was governor of New York.
• Roosevelt promised relief for the poor and more
  public works programs to provide jobs. He
  attacked Hoover and the Republicans for their
  response to the Great Depression.
• Roosevelt won a landslide victorywinning more
  than 57 percent of the popular vote.

35
(No Transcript)
36
The Election of 1932

• What were the key events of the presidential
  election of 1932?
• Recall- What government jobs did Roosevelt hold
  before running for president?
• Explain- How did Roosevelt plan to turn the
  economy around?
• Evaluate- Do you think as a presidential
  candidate, Roosevelt should have clearly
  described his plans to end the Depression?

37
Election of 1932

• Recall Which two candidates ran in the 1932
  presidential election?
• Rate Which partys idea about aid to needy
  Americans would work best?