Objective: Students will begin their study of the Great Depression. Drill: 1. How many of you have bank accounts, cash a check, used a money order or used.

Objective: Students will begin their study of the Great Depression.

Drill:

1. How many of you have bank accounts, cash a check, used a money order or used any other financial institution ?

Now explain to me how that financial institution (check, money order, bank account, etc.) it works and why you use it?

Trust(The Great Depression and the New Deal is a story on how the American people trust was lost

and regain.)

The Great Depression and the New Deal

I. Hoover’s presidency A. Herbert Hoover   1. Claimed in 1928 that "Poverty will be banished from the nation." "Everybody ought to be rich."

http://www.gothamgazette.com/graphics/poverty/rich_big.jpg

B. The Great Crash of 1929 1. Bull market = values of stocks continued to increase during the 1920s.

http://img.infoplease.com/images/home/bullmarket.gif

2. On margin buying of stocks. a. Investors purchased stocks from stockbrokers for as little as 5% down b. When stock values rose, investors would pay back their debt. c. If prices of stock decreased more than 10%, broker would sell stock for whatever price they could get.

http://www.financial-spread-betting.com/images/margin-calls.gif

Example

Day 1-Investor brought stock value at $100 ($5 down, $95 loan)

Good case

Day2-Stock value rose to $110 and sold it

[Bank gets $95 + $5 interest = $100 (Bank )]

[Investor gets $5 back + $5 profit = $10 (Investor )]

Bad Case:

Day 2: Stock value drops to $90 and sold it.

[Bank gets back only $90 out of $95 loan, loses $5 (Remember how do banks get their $)]

(Investors loses $5)

3. Over-speculation: a. Investors gambled that prices would continue to rise b. Artificial rises in stock & commodity values fueled speculation.

http://www.gold-eagle.com/editorials_99/fisher072699b.gif

4. The Great Crash a. Oct. 29, 1929 ("Black Tuesday") -- Everybody wanted to sell. Within hours, the stock market crashed. b. By mid-November, $25 billion in stock value had disappeared

C. Effects of the Great Depression 1. By 1932, 5,761 banks had failed (22% of total)

http://teacher.scholastic.com/pearl/timeline/navart/1929pix1.jpg

2. Unemployment reached 25% by 1932 (13 million people) excluding farmers.  a. As high as 33% including farmers; Chicago = 50%!

http://teacher.scholastic.com/pearl/timeline/time4.htm

3. People experienced loss of self-worth a. Many families broke up; marriage rate and birth rate declined. b. 3 million people became hobos and lived in makeshift shacks known as "Hoovervilles

II. Long-term Causes of the Great Depression A. Overproduction of goods by manufacturers   1. Underconsumption -- Ordinary workers and farmers ran out of credit and did not have enough money to keep buying products that were produced.   2. Many warehouses full of products that couldn't be sold. Result: companies lost money.

http://petsafe-warehouse.com/dog_crates/images/dogloo-overstock.jpg

B. Uneven distribution of income 1. 5% of the population received 30% of the total income. 2. One-half of country lived below the poverty line. These were potential customers.

http://www.newtechhigh.org/gallery/samples/2000/myk_browne/pages/great_depression/wealth_triangle.JPG