THE GREAT DEPRESSION

1
THE GREAT DEPRESSION

• AMERICAN HISTORY
• CHAPTER 17 SECTION ONE

2

• THE ELECTION OF 1928
• REPUBLICAN CANDIDATE-HERBERT HOOVER
• DEMOCRAT CANDIDATE-AL SMITH
• ISSUES
• PROHIBITION
• RELIGION (SMITH WAS CATHOLIC)
• ECONOMICS-REPUBLICANS WERE ASSOCIATED WITH
  PROSPERITY.

3

• HOOVER WINS 1928 ELECTION!!!
• HOOVERS BELIEFS
• 1) GOVT SHOULD BE AN UMPIRE, NOT ALWAYS A PLAYER
  IN THE ECONOMIC GAME.
• 2) GOVT SHOULD HELP PEOPLE HELP THEMSELVES.

4
CRASH OF 1929

• BETWEEN 1925 AND 1929 STOCK AND BONDS
• VALUES TRIPLED.
• SPECULATION OCCURS AS A RESULT.
• SPECULATION THE BUYING OF STOCKS THAT WAS
  BELIEVED TO GO UP IN VALUE IN ORDER TO SELL THEM
  AND MAKE A PROFIT.

5

• PEOPLE BOUGHT STOCKS ON MARGIN.
• THEY BORROWED MONEY TO PAY FOR THE STOCKS.
• INSTEAD OF PAYING FOR THE FULL PRICE FOR THE
  STOCK THEY ONLY PAID 10 OF THE PRICE.
• INVESTORS WERE ALLOWED TO PAY BACK THE REMAINING
  90 AT A FUTURE DATE.

6
ON MARGIN EXAMPLE

• JULIAN BUYS 10 SHARES OF US AIR STOCK FOR 100
  EACH. TOTAL COST IS 1000 BUT JULIAN ONLY PAYS
  10 OR 100. JULIAN STILL OWES 900 TO THE STOCK
  BROKER.
• IF THE STOCK GOES UP, JULIAN WILL SELL THE STOCK,
  PAY OFF THE BROKER AND MAKE A PROFIT.
• IF THE STOCK GOES DOWN, JULIAN WILL BE UNABLE TO
  PAY OFF THE BROKER.

7
RECIPE FOR DISASTER!

• STOCK MARKET DECLINES BECAUSE MANY COMPANIES
  STOCKS WERE OVERPRICED COMPARED TO THE EARNINGS
  THEY WERE OR WERENT MAKING.
• SEPT/1929 MANY INVESTORS GET OUT OF THE STOCK
  MARKET AND PRICES FALL.

8
BLACK TUESDAY

• 10/29/1929 BANKS BEGIN BUYING STOCK TO STOP
  FALLING PRICES.
• MOST STOCKS FALL TO 1/2 THEIR VALUE.
• BANKS CLOSE DOWN AND MILLIONS LOSE THEIR LIFE
  SAVINGS.

9
CAUSES OF THE GREAT DEPRESSION
10
1 OVERPRODUCTION

• MACHINES WERE MAKING MORE GOODS THAN PEOPLE
  NEEDED.
• INSTALLMENT BUYING PEOPLE PUT SOME DOWN AND
  MADE PAYMENTS WITH INTEREST.

11
2 UNDERCONSUMPTION

• NOT ENOUGH PEOPLE BUYING DUE TO LACK OF INCOME.
• 2,500 PER YEAR WAS NEEDED FOR AVERAGE FAMILY.
• 1/5 OF THE NATION LIVED IN POVERTY.

12
3 AGRICULTURE SLUMP

• FARMERS HAD BEEN LOSING ALONG WITH THE BANKS
  THAT LOANED THEM MONEY.
• FARMERS WERE TOO POOR TO BUY GOODS.

13
4 GOVT POLICES

• FORDNEY-MCCUMBER TARIFF DESTROYED FOREIGN MARKETS
  FOR USA PRODUCTS.
• MELLON TAX POLICES FAVORED THE RICH AND KEPT
  PEOPLE POOR.

14
CHAIN REACTION OF GREAT DEPRESSION

• BAD ECONOMIC TIMES CAUSED PEOPLE TO STOP BUYING
  RADIOS.
• ?
• RADIO PLANTS SHUT DOWN OR DOWNSIZE
• ?
• WORKERS IN RADIO PLANTS ARE LAID OFF
• ?
• MONTANA COPPER WORKERS ARE LAID OFF
• MINNESOTA LUMBER JACKS ARE LAID OFF.
• OHIO GLASS WORKERS LOSE JOBS TOO.