The 1920’s, The Great Depression and New Deal 1920 - 1940.

The 1920’s, The Great The 1920’s, The Great Depression and New Deal Depression and New Deal

1920 - 19401920 - 1940

During the 1920's there is great prosperityDuring the 1920's there is great prosperity Businesses are boomingBusinesses are booming WomenWomen

1919thth Amendment in 1920 – Right to vote Amendment in 1920 – Right to vote Flappers - fashionable young woman intent on Flappers - fashionable young woman intent on

enjoying herself and breaking standards of enjoying herself and breaking standards of behaviorbehavior

EntertainmentEntertainment Newspapers/magazine shape cultural fadsNewspapers/magazine shape cultural fads Radio broadcasts news, jazz and Fireside chatsRadio broadcasts news, jazz and Fireside chats First First movies w/sound (Jazz Singer) movies w/sound (Jazz Singer)

Escape for people during the Great DepressionEscape for people during the Great Depression

Scopes Trial Darwin’s Theory of Evolution John T Scopes, an educator, arrested for teaching

evolution New KKK

Anti-foreign, anti-Catholic, anti-black, anti-Jewish, anti-pacifist, anti-Communist, anti-internationalist, anti-revolutionist, anti-bootlegger, anti-gambling, anti-adultery, and anti-birth control.

Prohibition – 18th Amendment Prohibits alcohol Leads to smuggling by gangsters/mobsters and

speakeasies (illegal bar/nightclub)

Black Tuesday October 29, 1929

The Great Depression is caused by:Over production by business Reckless investment practices

(Collapse of the Stock Market) Over speculation of the Stock Market Buying on Margin

Banking collapses (Cause and Effect)

High protective tariffs

What happens to inventory when

you have companies continuing to make products and no one buys them? Products build up producing a

surplus

Then when you have a surplus what Then when you have a surplus what

happens to prices? happens to prices? Prices DropPrices Drop

What happens to a companies What happens to a companies

profits when prices drop? profits when prices drop? They dropThey drop

What happens to workers when What happens to workers when

companies are not making money?companies are not making money? Workers get laid offWorkers get laid off

What happens when workers get laid off?

They can't afford to by products so supply stays high and demand remains low.

More workers get laid off and the downward trend continues. This is Supply and Demand

Unemployment today is about 5.5%; during the Great Depression it was 25% or more (1932 - 1934)

Early 1920’s, supply was very high

and at the beginning of the 1920's so was demand, keeping prices steady

Late 1920's, demand was slacking off; businesses didn't drop their production

The increase supply causes the businesses to cut their labor force thus helping to cause the Great Depression.

What is Over Speculation? Paying more for stocks than they are

worth, because you believe they will go up in value

Reckless Investment – Buying on Margin People used borrowed money to buy

stocks

Price Per Share

# of Shares Total Price $ Borrowed if on Margin

$ you get at sale

$1.00 100 $100 $0 (Not on margin)

$100

Great Depression Causes: Over Speculation of Stocks and Great Depression Causes: Over Speculation of Stocks and Stock Market CrashStock Market Crash

Price Per Share

# of Shares Total Price $ Borrowed if on Margin

$ you get at sale

$1.00 100 $100 $0 (Not on margin)

$100

$1.00 100 $100 $90 $10

Great Depression Causes: Over Speculation of Stocks and Great Depression Causes: Over Speculation of Stocks and Stock Market CrashStock Market Crash

Great Depression Causes: Over Speculation of Stocks and Great Depression Causes: Over Speculation of Stocks and Stock Market CrashStock Market Crash

Price Per Share

# of Shares Total Price $ Borrowed if on Margin

$ you get at sale

$1.00 100 $100 $0 (Not on margin)

$100

$1.00 100 $100 $90 $10

$3.00 Price increases

100 $300 $0 $300

Great Depression Causes: Over Speculation of Stocks and Great Depression Causes: Over Speculation of Stocks and Stock Market CrashStock Market Crash

Price Per Share

# of Shares Total Price $ Borrowed if on Margin

$ you get at sale

$1.00 100 $100 $0 (Not on margin)

$100

$1.00 100 $100 $90 $10

$3.00 Price increases

100 $300 $0 $300

$3.00 Price Increases

100 $300 $90 $210

Great Depression Causes: Over Speculation of Stocks and Great Depression Causes: Over Speculation of Stocks and Stock Market CrashStock Market Crash

Price Per Share

# of Shares Total Price $ Borrowed if on Margin

$ you get at sale

$1.00 100 $100 $0 (Not on margin)

$100

$1.00 100 $100 $90 $10

$3.00 Price increases

100 $300 $0 $300

$3.00 Price Increases

100 $300 $90 $210

$0.50 Price Decreases

100 $50 $0 $50

Great Depression Causes: Over Speculation of Stocks and Great Depression Causes: Over Speculation of Stocks and Stock Market CrashStock Market Crash

Price Per Share

# of Shares Total Price $ Borrowed if on Margin

$ you get at sale

$1.00 100 $100 $0 (Not on margin)

$100

$1.00 100 $100 $90 $10

$3.00 Price increases

100 $300 $0 $300

$3.00 Price Increases

100 $300 $90 $210

$0.50 Price Decreases

100 $50 $0 $50

$0.50 Price Decreases

100 $50 $90 - $40

Business Cycle: Comparison Business Cycle: Comparison

Years 0

50

100

150

200

250

300

350

Sto

ck V

alue

Years 0

50

100

150

200

250

300

350

400

Sto

ck V

alue

Before Great DepressionBefore Great Depression After Great Depression After Great Depression

Briefly explain how over production helped Briefly explain how over production helped to cause the Great Depression. to cause the Great Depression.

Briefly explain the way buying on margin Briefly explain the way buying on margin helped to cause the Great Depression. helped to cause the Great Depression.

Answer the following:Answer the following:

Federal Reserve's failure to prevent collapse of the nation's banking system in late 20's and early 30's. This led to contraction in the nation's money supply. What is the Federal Reserve? What is Contraction?

So, Banks began to collapse but why?

You put your $ in the bank say $1000. The bank then lends your $ out (with

interest) to someone else. This how the bank makes $

The collapse takes place when you (and everyone else) want their money out of the bank.

The money has been loaned out and there is no money to pullout, the bank closes. With so many banks closing the amount of money out there begins to shrink.

Example. The bank has $100,000 in it Example. The bank has $100,000 in it from 10 different people. from 10 different people.

The bank takes that $100,000 and loans The bank takes that $100,000 and loans out $60,000 of it. out $60,000 of it.

Now when the economy starts to go bad, Now when the economy starts to go bad, like it did in the late 1920's early 1930's, like it did in the late 1920's early 1930's, the 10 people want their $100,000. the 10 people want their $100,000.

However, the bank only has $40,000. However, the bank only has $40,000. The Bank goes to the people it loaned The Bank goes to the people it loaned the $ to, they can't pay. So, the bank the $ to, they can't pay. So, the bank can't pay the 10 people their $, it shuts can't pay the 10 people their $, it shuts down.down.

Great Depression Causes: Great Depression Causes: High TariffsHigh Tariffs IMPORTANT FACT: IMPORTANT FACT: High protective tariffs High protective tariffs like the Tariff Act of 1930 (Hawley-Smoot like the Tariff Act of 1930 (Hawley-Smoot Act) that Act) that produced retaliatory tariffs in other produced retaliatory tariffs in other countriescountries, , slowing world trade. slowing world trade.

In 1930, the US passed the Tariff Act of

1930. Hawley-Smoot Act

This raised tariffs to their highest level in US history: 60%. (Remember that a tariff is a tax placed on imports from another country.)

Any country trading with the US, their products would be more expensive than they were before. This causes other countries to raise their tariff rates.

Great Depression Causes: Great Depression Causes: High Tariffs (video)High Tariffs (video)So, in a nut shell the whole world stops So, in a nut shell the whole world stops trading with each other because they will not trading with each other because they will not make any money. They will not make $ make any money. They will not make $ because no one will buy imported goods, because no one will buy imported goods, they are too expensive. they are too expensive.

IMPORTANT QUESTION: What were the

causes of the Great Depression? OVER PRODUCTION RECKLESS INVESTMENT PRACTICES

over speculation on stocks, using borrowed money to buy stocks, stock market crash.

FEDERAL RESERVE'S FAILURE TO KEEP THE BANKING SYSTEM FROM COLLAPSING.

HIGH PROTECTIVE TARIFFS LIKE THE HAWLEY-SMOOT TARIFF ACT. (1930)

Unemployment and HomelessnessUnemployment and Homelessness ((HoovervillesHoovervilles and Blankets) and Blankets)

Collapse of Financial system Collapse of Financial system (bank closings)(bank closings)

Political unrest Political unrest (growing militancy of labor unions)(growing militancy of labor unions)

Farm foreclosures and migrationFarm foreclosures and migration What are foreclosures? What are foreclosures? Dust BowlDust Bowl

Unemployment during Unemployment during the Great Depressionthe Great Depression

4,918,000

1,049,0002,190,000

801,0001,982,000

12,830,000

7,700,000

10,390,000

670,000

1920 1926 1932 1935 1940 1945Years

0

10

20

30

40

% o

f non

farm

wor

kers

une

mpl

oyed

Unemployment

The New Deal The New Deal 1933 - 19401933 - 1940

Great Depression caused hardships 1930 – 1932, government does little

to help out Herbert Hoover believed the

economy would fix itself 1932 election Franklin Delano

Roosevelt crushes Hoover

Franklin D. Roosevelt (FDR)Franklin D. Roosevelt (FDR) wanted wanted

to to change the role of government. change the role of government. It should be It should be more activemore active in solving in solving

the problems of the country. the problems of the country. FDR, in his FDR, in his inauguration speechinauguration speech, ,

rallied the people when he stated rallied the people when he stated ““Only thing we have to fear is fear Only thing we have to fear is fear itselfitself."."

New DealNew Deal New Deal tries to New Deal tries to fix causesfix causes and effects and effects 33 waysways

ReliefReliefRecovery Recovery Reform Reform

New Deal Agencies New Deal Agencies Glass-Steagall ActGlass-Steagall Act Civilian Conservation CorpsCivilian Conservation Corps Works Progress Works Progress AdministrationAdministration

National Recovery ActNational Recovery Act Public Works AdministrationPublic Works Administration 1st Agricultural Adjustment 1st Agricultural Adjustment ActAct

Securities and Exchange Securities and Exchange CommissionCommission

Tennessee Valley AuthorityTennessee Valley Authority Federal Housing AuthorityFederal Housing Authority

Social Security ActSocial Security ActWagner ActWagner ActFireside ChatsFireside ChatsEmergency Banking Relief Emergency Banking Relief 2nd Agricultural Adjustment 2nd Agricultural Adjustment ActAct

Indian Reorganization Act Indian Reorganization Act Fair Labor Standards ActFair Labor Standards Act

Unemployment was an effect of the

depression. To fix this…the "new deal" came up with

Works Progress Administration (WPA). People were given jobs by the government.

These relief measures provided direct payment to people for immediateimmediate help

Farmers having problems was also Farmers having problems was also

an effect of the depression. an effect of the depression. To fix this…the “New Deal“ came up To fix this…the “New Deal“ came up

with the with the Agricultural Adjustment Agricultural Adjustment Administration (AAA) Administration (AAA) This would This would help bring the nation out of the help bring the nation out of the

depression over timedepression over time. . Like reducing the number of pigs or gallons Like reducing the number of pigs or gallons

of milk. of milk.

Banking closures were a cause of Banking closures were a cause of the depression the depression To fix this…the “New Deal" came up To fix this…the “New Deal" came up

with the with the Federal Deposit Insurance Federal Deposit Insurance Corporation (FDIC).Corporation (FDIC). This reform measure This reform measure corrected unsound corrected unsound

banking and investment practices to banking and investment practices to prevent future problemsprevent future problems..

People not having savings in the People not having savings in the

bank in later life was an effect of the bank in later life was an effect of the Great Depression Great Depression Social Security Act offered safeguards Social Security Act offered safeguards

for workersfor workers Provides for retirement and worker Provides for retirement and worker

benefits like disabilitybenefits like disability (SSI and SSDI). (SSI and SSDI).

Understand, this time period deeply Understand, this time period deeply

changed America and the American changed America and the American people. people. A whole generation of Americans went A whole generation of Americans went

without, thus affecting future without, thus affecting future generations (i.e. Baby Boomers)generations (i.e. Baby Boomers)

This era This era saw a change in the role saw a change in the role government played in the lives of the government played in the lives of the American peopleAmerican people. . New Deal Legacy – Government is New Deal Legacy – Government is

responsible for some public services and responsible for some public services and promote general welfarepromote general welfare

Unemployment during Unemployment during the Great Depressionthe Great Depression

4,918,000

1,049,0002,190,000

801,0001,982,000

12,830,000

7,700,000

10,390,000

670,000

1920 1926 1932 1935 1940 1945Years

0

10

20

30

40

% o

f non

farm

wor

kers

une

mpl

oyed

Unemployment