The Great Depression

The Great Depression• “Brother Can You

Spare A Dime” – By Bing Crosby– Performed By Al Jolsen

• How did the working class Americans feel about the “hard times” they were facing in the 30’s?

Soup line in Chicago 1933Brother Can you Spare a Dime Song

The Great Depression

• the gov. had let them down• they are forgotten now• they did everything their country had

asked of them• cannot find a job• “What did I do wrong?”

The Great Depression

• Why American were optimistic during the 1920’s– highest standard of living– medical advances increased life expectance

• males 59 / women 53– stock market continued to go up– real wages had increased

The Great Depression

– women were going to college– unemployment falls below 4%– heroes of the day were business men

• they are saying everything is fine• unusually high confidence in the business world• welfare capitalism

– employers provided workers with raises and benefits

The Great Depression

Contributing Factors that lead to the Great Depression

The Great Depression1. Decline in Foreign Trade

– high tariffs wanted people to buy American goods

– built a tariff wall• Fordney-McCumber Tariff - 39%• Hawley-Smoot Tariff - 60%

– Added an additional 75 farm products and 925 industrial items to the list

– How would this lead to the Great Depression?

Answer…

• Hurt US sales over seas• Other countries cannot sell their goods in

US • People in other countries cannot make

money needed to buy American made goods being sold in their countries

• American businesses loss money because they have lost an overseas market

The Great Depression

2. Increase in Labor Saving Technology– more goods being produced with fewer labor– How would this lead to the Great

Depression?

Answer…

• More and more people were being laid off from work

• Machines were doing the jobs that were once done by people

The Great Depression

3. Decline in Purchasing Power– wages and salaries couldn’t keep up with the

rising prices– Real wages were rising more slowly than

prices of goods– How would this lead to the Great

Depression?

Answer…

• People were making less money• Had less money to spend• Were not buying goods• Businesses were not selling goods• Businesses would lay workers off

The Great Depression4. Uneven distribution of wealth

– mainly the rich getting richer

– Poverty line was <$2,000– 60% of Am families were at

or below that line in 1929– 80% had no savings– How would this lead to the

Great Depression?

Answer…

• Had no money to spend on luxury goods• Could only buy for their basic needs• If they had more money they probably

would have spent most of it– Poor people spend a greater percent of their

income than rich people– Greater spending would have meant a boost

in the economy

The Great Depression

5. Bank Failures- 1929 = 642- 1930 =1352- 1931 = 2294- Estimated 1 billion dollars had been

w/drawn and placed in shoe boxes- There was no insurance for depositors- How would this lead to the Great Depression?

Answer…• When money was needed there was no

money• Banks had failed and could not loan money

to people• Depositors lose their money they had less to

spend• Fewer banks meant fewer businesses loans• No banks were to be trusted even the

healthy ones

The Great Depression6. Overproduction in Agricultural and Industry

– farmers’ depression started in early 1920’s– overproduced during WWI to feed Europe– Farmers had borrowed money to buy more land

and more machinery– not needed now that war was over and Europe was

feeding itself– crop princes fell 50%– How would this lead to the Great Depression?

Answer…

• Many lost their homes and farms because they could not pay back their mortgages

• Close to 50% of families in Am were farm families in the 1920

The Great Depression

• In Industry– late 20’s warehouse had piled up with un-

bought consumer goods– overproduction caused some industries to

slow– auto industry slumps in 1925– housing fell in 1928– How would this lead to the Great

Depression?

Answer…

• Many businesses laid off workers• Expected the remaining workers to take

on additional work

The Great Depression7. Installment buying and Buying on Credit

– people buy items while paying from them (w/ interest) over many months

– people flocked to buy many new products whether or not they could afford them

– advertising made new goods irresistible– increase in personal debt– How would this lead to the Great

Depression?

Answer…

• Done in moderation it can boost economy but a high level can hurt the economy

• Producers do not get signs that supply is outrunning demand

• Workers who have been laid off are unable to complete their installment purchases

• This further hurts businesses

The Great Depression8. Buying on the Margin

– paying a small % of a stock’s price as a down payment and borrowing the rest

– 10% down borrowed 90% from broker who charged HIGH interest rate

– as stocks went up - sell - pay back the broker

– broker could demand payment at any time (call)

– How would this lead to the Great Depression?

Answer…

• If people started to sell due to a panic the price of stocks would drop

• This resulted in a loss for the broker and the bank who lent the broker money

• The bank loan had been made with the depositors’ money

• The depositors really lost

The Great Depression• Stock Market Crash

– Black Tuesday on Oct 24, 1929– wave of selling as people who

had brought on the margin were called

– 13 million shares changed hands– banks and insurance companies

bought in order to stabilize

The Great Depression9. Black Tuesday Oct 29,

1929– people and corporations

alike tried to sell stocks– record # of stock sold - 16

million– panic continues for two

weeks– total lost 30-40 million– How did this lead to the

Great Depression?

Answer…• If the stock market falls business

investment declines because confidence is shaken

• Banks are less likely to make loans• Spending by the rich declines because

they either have less money and/or are unsure about future earnings

• Spending by the poor declines because they have lost faith in the economy and/or they will have lost their job

The Great Depression Had Begun