Presentation11

Chapter 11

1929-1932

Brother can you spare a dime?

Definition

A worldwide economic downturn that began in 1929 and lasted

until about 1947. It was the longest and most severe depression

ever experienced by the industrialized Western world, sparking

fundamental changes in economic institutions, macroeconomic

policy, and economic theory.

Optimism thrived during the prosperity of the 1920’s, but it was a prosperity flawed

by, among other things, overextension of credit and inadequate worker purchasing

power. When economic well-being gave way to recession in 1929 and ultimately

depression, the shock discredited constitutional government in those nations lacking

a strong liberal tradition and already bedeviled by frustrated nationalists. Leaders

complained in Germany, Italy, and Japan that their nations did not have fair access

to raw materials, markets, and capital investment areas, all of which were necessary

for their economic health. They argued that their nations were the victims of

economic warfare—with its protective tariffs, managed currencies, and cutthroat

competition—and that they had been left behind in the race for economic self-

sufficiency and a favorable balance of trade. They made it plain that they would

fight, if necessary, for a better economic status.

Because they felt that democracy had failed, the people of those countries looked

with increasing favor on antidemocratic elements that glorified war as the means of

national salvation. In Italy, Mussolini’s cries that Italians needed both colonies and

glory struck a responsive chord. In Germany, Hitler’s National Socialists gained

power in 1933. Meanwhile Japanese militarists won a preponderant influence in the

inner circle of their government. America lost a lot of its freedoms to a socialist

method of government and strong arm tactics to confiscate the nation’s gold and

make it illegal to own it.

I. OBJ #1- Cause & Spark of the Depression

A. Causes of the Depression

1. Overproduction, too much stuff (Factories and Farms)

a. Factory Workers begin to get laid-off

- Workers cannot buy goods, even more goods are overproduced

b. Farmers Can’t Survive

- -low prices (can’t pay loans / make a living)

c. Supply & Demand- Prices Drop

2. Bank Failures

a. Banks close and loose $$$

b. People default on loans (Can’t pay back)

c. Banks cannot cover their deposits, because it was lent out to bad creditors **5,000 banks close between 1929-1932**

d. People lose entire LIFE SAVINGS

Factories making too

much; Farms growing

too much

Factories fire workers

(They aren’t needed)

Farm prices fall

(Farmers can’t make $$)

Farmers & Factory Workers

can’t pay back loans to Banks:

DEFAULT!!

Banks close because they

have no money: Loans

have not been paid back,

can’t give people their

savings

BANKS have NO $$

PEOPLE LOST SAVINGS & JOBS

Economy has to reset through

deflation or new markets have to be

created

The government steps in to control

=+People Default

on Loans

Banks have

no money to

give people

Banks Close

People Lose

savings

B. SPARK!!! Of the Depression

1. Stock Market Crash, Black Tuesday, 29 Oct 1929

a. Summer 1929, Investors begin to sell stocks

b. Supply & Demand– Massive Sell-Off and prices begin to tank

2. How???

a. Buying on Margin (Borrowing $$)

- Buy stock by just paying a small portion of what the stock

is worth—sometimes as low as

10%

ex.- 100 shares at $10= $1000 only pay $300

still owe $700

- Problem: stocks crash, margins are called in, you loose

your money and can’t payback your stock broker

- stock broker can’t pay back bank

- there is no such thing as a free lunch because the

government was not going to print more money and

devalue the purchasing power of the dollar

Hoover admn

started to

interveneFDR admn

started to

intervene

1. OBJ. #2 – Affects of the Depression1. Jobless / Homeless

1. 1930-1932 – Unemployment goes from 4 to 12 million—25%

2. People are desperate!!!!

2. Blame for President Hoover

1. Said it is NOT the government’s job to help the poor. There was no such thing as government welfare until the government started meddling

1. Said churches, philanthropists, and other groups should help

2. PROBLEM: The Hoover administration started to help and prolonged the recession. Hoover’s programs were expanded by FDR and the recession turned into the Great Depression

2. People named poor places after Hoover1. Hooverville- Shanty towns

2. Hoovermobile- cars pulled by mule

3. Hobos- look for jobs traveling the rails

4. Hooverblankets- newspapers used as blankets by homeless

1. Bonus Army

1. WWI veterans who were promised a

monetary bonus in 1945

1. Veterans wanted it NOW (1932)

1. Veterans go to Washington and “camp out”

2. Hoover sends in the Army (Eisenhower,

MacArthur), used tear gas, machine guns,

and burned the camp down of our own war

veterans.

1. Escaping the Depression

1. Radio- Comedies, Soap Operas

2. Movies- Shirley Temple, Child Actors

1. Snow White (first full-length animation)

2. Wizard of Oz

1. Small girl escaping the Dust Bowl

3. Literature

1. Steinbeck, Grapes of Wrath

1. About a family of ‘Okies’ escaping the Dust Bowl and how horribly they were treated

2.

Wizar

dof

OZ

QUICK REVIEW:

• Causes:

• Overproduction

• Over-speculation

• Bank Closings

• Spark:

• Stock Market Crash

• Results:

• Unemployment

• Life Savings Lost

What are some affects?

Great Depression

What are some causes and sparks?

Definition

.

1. What countries said that they were in economic warfare?

2. Give a cause of the Great depression and accompanying statistic?

3. Give an affect of the Great Depression

4. Who was blamed for the Great Depression?

5. What did the Bonus Army want?

The Dust Bowl is a popular name for the approximately 150,000- sq./mi. (388,500-

sq./km) area that includes the Oklahoma and Texas panhandles and adjacent parts

of Colorado, New Mexico, and Kansas. The area is characterized by light soil, a

low annual rainfall of 15 in. (380 mm), and high winds.

The first white settlers used the region for livestock grazing. Early in the 20th

century, however, farmers began to plow up the natural grass cover and planted

winter wheat. The area suffered from severe drought between 1934 and 1937, and

without the complex root system of the grasses to anchor it, much of the soil was

picked up by the winds. The resulting dust storms and sandstorms were so severe

that roads and houses were buried, and clouds from the storms were observed

hundreds of miles away. More than half the population left the area. The federal

government replanted grass, planted trees, and introduced scientific agricultural

methods, and as a result farming became possible again. The Dust Bowl endured

other, less severe droughts in the 1950s and ‘60s. The migration and hardships of

the Dust Bowl farmers are described in John Steinbeck’s novel The Grapes of

Wrath (1939).

1. Natural Disaster “The Dust Bowl”1. Great Plains suffers a huge drought (1931)

1. Causes

1. Drought—no rain

2. New technology—tractors and steel plows tear-up the prairie grasses that was holding onto soil, drought turns open soil into a sand box

2. Huge dust storms cover ‘Great Plains’

2. Results1. Can’t pay banks—banks take farms

2. Many Great Plains farmers move to California

1. Try to get jobs on large farms

2. Treated poorly in California

1. ‘Oakies’ & ‘Arkies’ not wanted in the West

Real GNP fell by 30% between the years 1929 and 1933.

Unemployment at its worst was 25%

Corporate profits were negative in 1931, 1932, and 1933.

Hoover’s incessant meddling with the economy with government interventions turned the recessionof 1929 into the Great Depression.

Hoover implored big business to keep wages high (which they did) while prices were fallingcausing mass unemployment.

Federal Farm Board subsidized farmers and bought their crops above world market prices to holdthe crops off the market for prices to rise. Canada and Argentina filled the world void and Americawas stuck with the crops. There were too many farmers!

Smoot-Hawley Tariff increased the price of exports by 59% and foreign countries retaliated againstus, especially the automobile industry.

Andrew Mellon, Secretary of the Treasury, did an about-face and championed a massive taxincrease from 25% to 63%. Vast spending on public-works in 4 years out spent the previous 30years.

Dust Bowl Statistics

ExamplesExamples

Great

Depressio

n

1. What states does the Dust Bowl consist of?

2. How did the Dust Bowl occur?

3. What novel, later movie, was written about

the Dust Bowl?

4. What was the highest unemployment

percentage?

5. What did Secretary of Treasury Mellon do

with the income tax rate?