The Beginning of the Great Depression

1
The Beginning of the Great Depression

• Price Support
• Credit
• Alfred E. Smith
• Dow Jones Industrial Average
• Speculation
• Buying on Margin
• Black Tuesday
• Great Depression
• Hawley-Smoot Tariff Act

2
Industries

• Railroad, textiles, and steel were facing more
  competition
• Mining and lumber were also facing tough
  competition and were not needed as much as they
  once were
• Housing market began to fall

3
Agriculture

• Prices for wheat and corn rose during the war
• Farmers planted more to make a larger profit
• Bought new equipment on credit
• Annual farm income began to decline
• 1919 10 billion to 1921 4 billion
• Farmers began to default on their loans and banks
  began to fail

4
Save Us!

• Congress tried to create the McNary-Haugen bill
  that would have allowed for price support
• The government would buy surplus crops at a
  guaranteed price and then sell them on the world
  market
• Cotton, corn, tobacco, wheat
• Pres. Calvin Coolidge vetoed the bill twice

5
Deeper Down

• Since farmers had more debt they had less money
  to spend
• This had a trickle down effect
• Many Americans were buying on credit
• Buy now, pay later with interest
• When faced with debt, people spent less money in
  order to pay off debt
• Only 5 of the population earned 10,000 or more
  per year
• 70 of the population earned 2500 per year

6
Election of 1928

• Secretary of Commerce Herbert Hoover
• Alfred E. Smith
• Governor of New York
• The first Roman Catholic to run for president
• Hoover won based on the past success of his party

7
Stock Market

• Some people invested their money in the stock
  market
• The Dow Jones Industrial Average is used as a
  barometer of the nations economic health
• Based off of the prices of 30 large firms traded
  on the NYSE
• The market rose steadily through the 20s
• About 3 of the nation owned stocks

8
Stock Market cont.

• Many people were involved in speculation
• Buying high risk stock with a high interest rate
• Others were buying on margin
• Paying a small percentage of the stock price as a
  down payment and then borrowing the rest
• There was little govt regulation of the stock
  market

9
CRASH!!

• Early Sept. 1929 stock prices began to fall
• Investors quickly began to sell their stock.
• Oct. 24 the market took a plunge
• October 29, 1929 Black Tuesday
• 16.4 million shares of stock were dumped
• People who had bought on margin were left with a
  huge debt but not product to show for it
• Other people lost their savings
• By mid-November 30 billion had been lost
• Signaled the beginning of the Great Depression

10
The Great Depression

• 1929-1940
• The U.S. economy plummeted and unemployment
  skyrocketed
• People began to withdraw all of their money from
  banks
• 1929- 600 banks closed
• By 1933 11,000 of the 25,000 had failed
• The government did not protect or insure banks

11
The Great Depression cont.

• 1929-1932 the GNP was cut in half
• 104 billion to 59 billion
• 90,000 businesses went bankrupt
• Unemployment went from 3 in 1929 to 25 in 1933

12
Hawley-Smoot Tariff

• Much of Europe was hit by the Depression as well
• The U.S. had difficulty importing European goods
• 1930 Congress tried to protect American farmers
  and manufactures from foreign completion with the
  Hawley-Smoot Tariff
• Reduced the flow of European goods into U.S.
• Made things worse Europe wouldnt buy American
  products

13
Causes of the Great Depression

• Tariffs and war debt policies cut down the
  foreign market for American goods
• A crisis in the farm sector
• The availability of easy credit
• Unequal distribution of wealth
• The federal government did little to avoid
  disaster
• Hoover encouraged Americans to stay confident