5.3 The Great Depression

5.3 The Great Depression

The roaring 20s ended with a flash with a severe economic decline

The Great Depression

The economic boom of the Roaring Twenties was followed by an economic bust in the 1930s. 

This period of severe economic decline was called the Great Depression. The Great Depression was caused, in part, by:

-The federal government’s monetary policies

-Stock market speculation

-Increasing consumer debt 

Multiple Choice

Large numbers of banks and businesses failed• Large numbers of people were homeless and hungry• Farmers’ incomes fell to low levels
What was the cause of these?

• Reconstruction
• Great Depression
• Great Migration
• Segregation

Consumer Debt (Cause 1)

During the 1920s a new wave of inventions and products led to a new way of life and a higher standard of living.

Overproduction

-More goods were being produced than most people could afford to buy

-Factories had a surplus of goods they couldn’t sell

-As a result, factories closed, workers lost income, and consumer debt increased

Credit

-People turned to banks to get loans so they could afford to buy new products

-Families quickly went into debt and couldn’t repay the banks for the loans they took out

  

Multiple Choice

Which of the following was a major cause of the Great Depression?

• overproduction and underconsumption
• a decrease in the supply of consumer goods
• an increase in demand for imported products
• an increase in the price of wheat on the world market

Multiple Choice

Factories dealt with _______________ during the Great Depression.

• increased profits 
• decreased applicants 
• increased stock value
• left over products       

Monetary Policy (Cause 2)

The excessive amount of lending by banks helped lead to the Great Depression. The Federal Reserve attempted to control these practices but made poor choices.  

What is the Federal Reserve?

-The Federal Reserve has the responsibility of monitoring the health of the economy. They make adjustments to interest rates to help balance the economy 

Monetary Policy

-The main role of the Federal Reserve Bank is to keep our economy healthy. 

Multiple Choice

What poor decision did the Federal Government make that helped lead to the Great Depression?

• Increased money in circulation

• decreased money in circulation

Stock Market

Investments

-When someone starts a business, they divide the business into parts called shares. -When people buy shares of a company, they are making an investment in that business. 

-Many people bought stock expecting companies to make money. That way they could sell their share for a profit later down the road

-But when the stock prices fell, many investors or, people who bought stocks, lost everything! 

Multiple Choice

What happened if stock prices fell?

• This meant the economy was doing great!

• More factories would then began to open to meet the demands of the economy

• People who invested a lot of money lost a lot of money

• More people began taking out loans so they could invest as prices fell

Buying on Margin

Buying on Margin

-Buying stocks was easy in the 1920s. You didn’t even need to have the full amount of money to buy stocks

Example: Buying on margin allowed you to pay 10% of the stock's price upfront. You could be loaned the other 90% Someone with $1,000 could borrow $9,000 and get $10,000 worth of stocks 

-This led to stock speculation and inflated prices of stocks(stock is worth less than it should be)

Multiple Choice

What did Buying on Margin allow for?

• It allowed people to use loans to invest in the Stock Market

• It allowed stocks to be split between multiple people

• They were coupons used to get cheaper stocks

• It made it so only the rich could invest in the stock market

Multiple Choice

What was the concern with credit?

• Interest rates on loans were too high. 
• Banks required an application to get a loan.
• People did not know where to get a loan. 
• People could not make payments on loans.

Stock Market Crash (Cause 3)

People were BUYING stocks in businesses that were not worth the amounts they were paying for them and the banks were loaning out more money than what peoples’ investments were worth

Stocks market crashes

-October 1929 the Stock Market completely crashes

-Stocks fall at a rapid rate, and investors/traders are trying to sell that way they don't lose too much money

Banks

-Banks began requiring people to pay back loans. When they couldn’t that's when the trouble really began

Multiple Choice

What do I mean by speculation, when I say Stock Market Speculation?

• Stocks are doing great and they had proof!

• Stocks are doing okay

• Stocks are doing terrible, but investors think they are doing great because of prices

• Stocks are doing terrible because of high prices

Multiple Choice

When did the Stock Market Crash?

• 1930

• 1929

• 1920

• 2020

Multiple Choice

The New York Times
October 1929
The topic of this newspaper article is the...

• Stock Market Crash
• Stock Market Boom
• Great Migration north and west
• Roaring Twenties

Banks

Banks Close

-Banks close due to people not being able to pay back their loans

-People who put their money in the bank lost their life savings.

-When large numbers of people tried to take money out of the banks, many banks went out of business because they did not have the people’s money!

The banks closing really mark the start of The Great Depression. The stock market crash speculation & crash, consumer debt, and bad monetary policies from the Government lead us to banks closing. 

Multiple Choice

When people could not pay back their loans ___________. 

• banks forgave them
• banks loaned more 
• banks raised the interest rate
• banks closed

Herbert Hoover (1929-1933)

When the Great Depression began, Hoover believed the U.S. economy would recover on its own and refused to provide any direct relief

"Hoovervilles”

Communities where homeless people lived. They built shacks out of scrap wood and metal

Hoover finally acted after increased pressure from the public. He cut taxes, increase jobs through public projects, helped out farmers, and tried to help banks secure loans.

-He was easily defeated in the next elections by Franklin Delano Roosevelt(FDR)

Multiple Choice

Who was the president during the beginning of the Great Depression?

• Woodrow Wilson

• Franklin Roosevelt

• Herbert Hoover

• Jimmy Carter

Multiple Choice

What was the main reason for the emergence of “Hoovervilles” like the one shown in the photograph?

• Many Americans had lost jobs during the Great Depression.
• Thousands of homes had been destroyed by the effects of the Dust Bowl.
• Housing projects could not keep up with the demand for homes needed by the poor.
• Preparations for World War I had created a shortage of building materials.

Multiple Choice

What were the names of the groups of shacks that were built in city parks?

• Roosevilles
• Hoovervilles
• Teddy Towns   
• Fort Franklin         

FDR

-Elected in 1932 - served until 1945… (he was elected 4 times!)

-He promised a “New Deal” for the American People

-Hoover believed the Government shouldn’t interfere with the economy, but FDR felt the opposite

-FDR took an active role to try and help the economy

New Deal

Roosevelt’s New Deal

His plan to help the nation recovered involved pumping money into the economy. Through the New Deal, we see new programs and acts that increase jobs, increase money circulation, and put regulations on the economy.

Banks

President Roosevelt closed the banks calling it a “bank holiday”

-Allowed for banks to reopen under the supervision of the Federal Treasury

-Helped stabilize the banks and to bring back confidence in the banking system

Multiple Choice

FDR addressed the American public in weekly broadcasts known as:

• FDR Hour
• Hangin' With Franklin
• Fireside Chats
• Around the Fire

Multiple Choice

What was the name of the program Roosevelt created to make jobs and stimulate the economy?

• Relief Now
• Recovery Plan
• New Deal
• Big Deal

Multiple Choice

What was a guiding principle of the New Deal economic policies?

• Pro-business tax breaks would solve the problems associated with urban poverty.
• Antitrust legislation would destroy the free market economy of the United States.
• Rugged individualism must be allowed to solve social inequality.
• Government must assume more responsibility for helping the poor.

New Deal Programs (read next slide!!!)

New Deal Programs

-Works Progress Administration(WPA) - The WPA hired artists to paint murals and create sculptures to decorate buildings across the country.

-Public Work Administration(PWA) - This program built roads, bridges, schools, hospitals, and dams across the country 

-The Civilian Conservative Corps (CCC) - created jobs for many men like environmental projects (national/state parks)

-23rd Amendment - Repealed 21st Amendment 

-Agricultural Adjustment Administration (AAA) - first one paid farmers to plant less, but was deemed unconstitutional - second one bought farmers surplus and stored them until prices went up 

-Federal Deposit Insurance Corporation(FDIC) -Insurance on bank deposits - this way if the bank fails people won’t lose their money 

-Tennessee Valley Authority(TVA) - Goal was to get power and electricity to rural areas. The government built 21 dams to control floods produce electricity 

-Security & Exchange Commission - Created to watch over Stock Market to prevent fraud and another collapse (no more buying on margin)

-Social Security Act - Most important - Provided a pension to retired people, cared for orphans and the disabled and set up a system of unemployment insurance

Multiple Choice

Social Security• Federal Work Programs• Farm Assistance• Increased rights for labor• Environmental Improvement Programs

What is the best title for the list?

• League of Nations

• New Deal

• Reconstruction

• Segregation

Multiple Choice

The purpose of the New Deal program was to...

• improve working conditions in factories

• stop the sale of alcohol in states

• end discrimination against African Americans

• help the nation recover from the Depression

Dust Bowl

Midwestern farms and homes were destroyed when a drought in the 1930s dried up crops and topsoil. Heavy winds blew the topsoil away, burying homes and destroying crops. Over 1 million farmers were driven from their farms. Many moved to California. 

Multiple Choice

During the 1930s, poor land management and severe drought conditions across parts of the Midwest resulted in the

• formation of the United States Department of Agriculture
• creation of wheat surpluses
• growth of the Populist movement
• development of Dust Bowl conditions on the Great Plains

The New Deal did not end the Great Depression

The Great Depression doesn't end until WWII. The New Deal increased the Government's role in the economy and of the lives of American Citizens.

FDR

After FDR was elected to his fourth term he suddenly died. With his death and the end of his presidency came an amendment to the constitution that limited the presidents to only serve 2 terms.

Multiple Choice

"The Life of Franklin D. Roosevelt"
What chapter would most likely be found in this book?

• “Invention of the Airplane”
• “Invention of the Light Bulb”
• “The Development of the League of Nations”
• “The Development of the New Deal”

Multiple Choice

A major result of the New Deal was that it

• eliminated poverty in the US
• extended the merit system in the civil service
• destroyed the private enterprise system
• greatly increased the size and power of the Federal Government

Multiple Choice

Which of the following was "NOT" a cause of the Great Depression?

• Over speculation on stocks using borrowed money

• bad monetary policies

• Unpaid debts from fighting World War I

• Too much debt from buying goods on installment plans