Learning Standards: SS5H5aSS5Ec

Essential Question:What was the Great Depression and how

were millions of people affect by this event?

What caused the Great Depression?

• Stock market Crash of 1929

• Banks failed

• Reduction in spending

• Tariffs

• Dust Bowl

The Roaring 20’s• The new concept of

“credit” • People were buying:

– Automobiles

– Appliances

– Clothes

• Fun times reigned– Dancing

– Flappers

– Drinking

Why was this bad?• Credit system

– People didn’t really have the money they were spending

• WWI– The U.S. was a major

credit loaner to other nations in need

– Many of these nations could not pay us back

The Stock Market • People bought stocks

on margins– If a stock is $100 you

can pay $10 now and the rest later when the stock rose

• Stocks fall– Now the person has

less than $100 and no money to pay back

And then….

• With people panicking about their money investors tried to sell their stocks– This leads to a huge decline

in stocks– Stocks were worthless now

• People who bought on “margins” now could not pay

• Investors were average people that were now broke

Why did banks fail in 1929?

• Banks make money by charging interest on the loans they give. People go to them and ask them to purchase a house or a car and in return, they will pay the bank a little at a time alone with a little extra (interest) until all is paid off.

• In 1929 as is today, they loaned out more money than they had coming in. People got scared and withdrew their savings, leaving the banks with only the money they were counting on from the interest rates they were charging.

Why did banks fail in 1929?

• When people began to default on their loans not only did the bank lose money from the interest it was no longer getting, but then they had to foreclose on the defaulted home loans. It then became a matter of reselling (usually at a loss) the homes they took back. Because no one was buying (homes), the asking price for the homes dropped (meaning the banks would get even less) and if they could not sell, they were stuck with a property that was not bringing in any money.

Why did banks fail in 1929?

• People began pulling their money out of savings and suddenly, there simply was no more money. The banks had used people's money (savings) to buy the homes they'd loaned money for and so, the money was non-existent , it was tied up in the homes that were now in foreclosure. People wanted to withdraw their money, but there was no money left.

F D I CFederal Deposit Insurance

CorporationThe Federal Deposit Insurance Corporation

(FDIC) is an independent agency of theUnited States government that protects the funds depositors place in banks and savings associations. FDIC insurance is backed by the full faith and credit of the United States government. Since the FDIC was established in 1933, no depositor has ever lost a single penny of FDIC-insured funds.

F D I CFederal Deposit Insurance

Corporation• The standard insurance amount is $250,000

per depositor, per insured bank, for each account ownership category.

• FDIC insurance does not cover other financial products and services that banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or securities.

• Herbert Hoover was president at the start

• Philosophy: We’ll make it!

• What He Did: Nothing

• The poor were looking for help and no ideas on how to correct or help were coming

• Farmers were already feeling the effects– Prices of crops went down– Many farms foreclosed

• People could not afford luxuries– Factories shut down– Businesses went out

• Banks could not pay out money• People could not pay their taxes

– Schools shut down due to lack of funds

• Many families became homeless and had to live in shanties

Many waited in unemployment lines hoping for a job.

People in cities would wait in line for bread to bring to their family.

Some families were forced to relocate because they had no money.

“Hooverville”• Some families were

forced to live in shanty towns– A grouping of shacks

and tents in vacant lots

• They were referred to as “Hooverville” because of President Hoover’s lack of help during the depression.

The South and the Dust Bowl

A drought in the South lead to dust storms that destroyed crops.

“The Dust Bowl”

The South Was Buried

• Crops turned to dust=No food to be sent out

• Homes buried

• Fields blown away

• South in state of emergency

• Dust Bowl the #1 weather crisis of the 20th century

Two Families During the Depression

A Farm Foreclosure

Some families tried to make money by selling useful crafts like baskets.

Apple SellersPeople would buy apples for a penny a piece and try to sell them for a nickel a

piece.

Apple Sellers

Many tried apple-selling to avoid the shame of panhandling. In New York City, there were over 5,000 apple sellers on the street.

*FDR*• When he was

inaugurated unemployment had increased by 7 million.

• Poor sections (like Harlem) had 50% of the pop. unemployed

• Instated the “New Deal”

• People everywhere were effected by the depression

• It wasn’t till President Roosevelt took over and tried to put the economy back together that people even saw a glimmer of hope