THE GREAT DEPRESSION:THE DEPRESSION BEGINS

1929-1939

DEPRESSION BEGINS•Businesses & officials = minor setback & temp.•OBVI.= severe economic depression

•“While the crash only took place 6 months ago, I am convinced we have now passed the worst & w/ continued unity of effort we shall rapidly recover. There is one certainty of the future of a ppl of the resources, intelligence & character of the ppl of the United States—that is, prosperity.”

—Herbert Hoover, October 2, 1930

BANKING CRISIS•Crash banking crisis= losses & defaulting on loans•Forced to close

•Fear ppl w/drew their savings more failures

•1930-1932= 5,000 banks failed•1 in NYC bank wiped out 400,000 ppl

BUSINESS FAILURES

•Banking crisis business failures

•Cut production & jobs= accelerated the slump•26,000 bankrupt in 1930•28,285 next year

•Unemployment all time lows= 1932- 23.6%

•The crash, crisis, failures, & unemployment= signals (symptoms) of the depression

WHAT CAUSED THE GREAT DEPRESSION?

•Global depression

•Income gap & Consumer Debt

•Business cycle

GLOBAL DEPRESSION•Setbacks b/c of war debts

•World trade rapidly

•U.S. industries that relied on sales abroad had large surpluses

GLOBAL DEPRESSION•Situation worse w/ high tariffs on imports•Smoot-Hawley Tariff- highest EVER•Protected industries from inexpensive imports•Eliminated market for foreign goods

INCOME GAP & CONSUMER DEBT

•Central cause•Disposable income of the wealthiest 1% by 63%•Poorest 93% by 4%

•Used credit= PRETEND

•Relying on credit=economic chaos, couldn’t pay debt

BUSINESS CYCLE•Depressions- an inevitable part of the cycle– reg. ups & downs of business•Length & severity of the Great Depression went beyond the norm

QUICK REVIEW How is the beginning of the Great Depression like a domino affect?

What were signs of the Great Depression?

What were causes of the Great Depression?

ACTIVITY: BANKING SIMULATION•You are going to take on the role of individuals living at the beginning of the Great Depression.

•You live in a community with 3 banks

•3 bankers, rest are customers

•Bankers to the front w/ a table, make a sign for your bank and tape it to your desk

ACTIVITY: BANKING SIMULATION•Bankers will be opening for business

•Everyone, take the action instructed on your cards

ACTIVITY: BANKING SIMULATION•How many made deposits in your bank?

•How many made loan payments to your bank?

•How many were unable to make loan payments?

•How many wanted to withdraw money from your bank?

•Did anyone have any problems? Why? Which bank did you have your account at?

•How did it make you feel?

ACTIVITY: RADIO BROADCAST

•Imagine it is 1930, you are economists who have been asked to appear on a radio program & explain the causes of the Great Depression to listeners

•Each of you, write a script for a broadcast discussing those causes & contrasting the depression w/ a normal cycle