The Consequences of the Wall Street Crash

Taking Stock of the Crash At first, long-term effects unknown Speculators were ruined Rich Americans lost most of their investments Downturn in spending, as the rich had been the biggest spenders in the 1920s People who borrowed $$$ to invest went bankrupt Some banks went bankrupt as a result of dud loans now unrecoverable A tragic but isolated event? President Herbert Hoover assured the nation that prosperity was ‘just around the corner’ He lowered taxes to promote consumption Summer 1931: production began rising again Depression was ‘just around the corner’ Late 1931: Banks crashed & businesses failed The Crash cost Americans dearly; their most crucial asset for prosperity: Confidence!

At first, long-term effects unknown

Speculators were ruined

Rich Americans lost most of their investments

Downturn in spending, as the rich had been the biggest spenders in the 1920s

People who borrowed $$$ to invest went bankrupt

Some banks went bankrupt as a result of dud loans now unrecoverable

A tragic but isolated event?

President Herbert Hoover assured the nation that prosperity was ‘just around the corner’

He lowered taxes to promote consumption

Summer 1931: production began rising again

Depression was ‘just around the corner’

Late 1931: Banks crashed & businesses failed

The Crash cost Americans dearly; their most crucial asset for prosperity: Confidence!

Banking Crisis 1929: 659 banks failed, beginning vicious cycle People feared more bank failures so they withdrew their money triggering … More bank failures! 1930: 1352 bank failures Biggest to go bust was Bank of the United States in New York 1/3 of New Yorkers had savings there 1931: European bank failures trigger more panic 2294 banks go under People kept cash in safety deposit boxes, mattresses, anything but banks

1929:

659 banks failed, beginning vicious cycle

People feared more bank failures so they withdrew their money triggering …

More bank failures!

1930:

1352 bank failures

Biggest to go bust was Bank of the United States in New York

1/3 of New Yorkers had savings there

1931:

European bank failures trigger more panic

2294 banks go under

People kept cash in safety deposit boxes, mattresses, anything but banks

The Downward Spiral Hoover’s optimistic talk fell on deaf ears Americans now kept money rather than spend it Lack of demand for products led to job lay-offs or pay cuts and more closed factories This is depressing! Between 1928 – 1933: Industrial production fell 40% Farm production fell 40% Average wages fell 60% Most of the gains of the ‘Roaring Twenties’ were wiped out Downward spiral into darkness The worst depression in world history By 1933 US had 14 million unemployed, 5000 bank failures total Farm income down to $ 5 billion (from a high of $ 22 billion in 1919) International trade shrank to $ 3 billion in 1932 (from $ 10 billion in 1929)

Hoover’s optimistic talk fell on deaf ears

Americans now kept money rather than spend it

Lack of demand for products led to job lay-offs or pay cuts and more closed factories

This is depressing! Between 1928 – 1933:

Industrial production fell 40%

Farm production fell 40%

Average wages fell 60%

Most of the gains of the ‘Roaring Twenties’ were wiped out

Downward spiral into darkness

The worst depression in world history

By 1933 US had 14 million unemployed, 5000 bank failures total

Farm income down to $ 5 billion (from a high of $ 22 billion in 1919)

International trade shrank to $ 3 billion in 1932 (from $ 10 billion in 1929)

Focus Task: What impact did the crash have on the American economy? Draw a diagram to show how the following were connected to each other: The Wall Street Crash The banking crisis Reduced spending unemployment

Draw a diagram to show how the following were connected to each other:

The Wall Street Crash

The banking crisis

Reduced spending

unemployment

The Human Cost of the Depression

Farmers Hurt Worst of All Many farmers unable to pay mortgage Many farmers organized themselves to resist bank foreclosures When sheriffs came to seize land farmers w/ pitchforks & hangman’s nooses Other farmers barricaded highways Most farmers simply packed up & moved to where they thought work was available Central Southern states hit hardest Over-farming & drought turned millions of acres into the Dust Bowl Many of these farmers headed for California (real Grapes of Wrath stuff) The following photographs were taken by photographers hired by FDR’s gov’t to record the lives of Americans in the Great Depression. Most photos are from Dorothea Lange

Many farmers unable to pay mortgage

Many farmers organized themselves to resist bank foreclosures

When sheriffs came to seize land farmers w/ pitchforks & hangman’s nooses

Other farmers barricaded highways

Most farmers simply packed up & moved to where they thought work was available

Central Southern states hit hardest

Over-farming & drought turned millions of acres into the Dust Bowl

Many of these farmers headed for California (real Grapes of Wrath stuff)

Fin

PSDs for The great Depression During the last three months I have visited … some 20 states of this wonderfully rich and beautiful country. A number of Montana citizens told me of thousands of bushels of wheat left in the fields uncut on account of its low price that hardly paid for the harvesting. In Oregon I saw thousands of bushels of apples rotting in the orchards. At the same time there are millions of children who, on account of the poverty of their parents, will not eat one apple this winter … I saw men picking for meat scraps in the garbage cans of the cities of New York and Chicago. One man said that he had killed 3,000 sheep this fall and thrown them down the canyon because it cost $1.10 to ship a sheep and then he would get less than a dollar for it … The farmers are being pauperized [made poor] by the poverty of industrial populations and the industrial populations are being pauperized by the poverty of the farmers. Neither has the money to buy the product of the other; hence we have overproduction and under-consumption at the same time. Evidence of Oscar Ameringer to a US government committee in 1932

During the last three months I have visited … some 20 states of this wonderfully rich and beautiful country. A number of Montana citizens told me of thousands of bushels of wheat left in the fields uncut on account of its low price that hardly paid for the harvesting. In Oregon I saw thousands of bushels of apples rotting in the orchards. At the same time there are millions of children who, on account of the poverty of their parents, will not eat one apple this winter … I saw men picking for meat scraps in the garbage cans of the cities of New York and Chicago. One man said that he had killed 3,000 sheep this fall and thrown them down the canyon because it cost $1.10 to ship a sheep and then he would get less than a dollar for it … The farmers are being pauperized [made poor] by the poverty of industrial populations and the industrial populations are being pauperized by the poverty of the farmers. Neither has the money to buy the product of the other; hence we have overproduction and under-consumption at the same time.

Evidence of Oscar Ameringer to a US government committee in 1932

PSDs for The Great Depression Last summer, in the hot weather, when the smell was sickening and the flies were thick, there were a hundred people a day coming to the dumps … a widow who used to do housework and laundry, but now had no work at all, fed herself and her fourteen-year-old son on garbage. Before she picked up the meat she would always take off her glasses so that she couldn’t see the maggots. From New Republic magazine, February 1933 There is not an unemployed man in the country that hasn’t contributed to the wealth of every millionaire in America. The working classes didn’t bring this on, it was the big boys … We’ve got more wheat, more corn, more food, more cotton, more money in the banks, more everything in the world than any other nation that ever lived ever had, yet we are starving to death. We are the first nation in the history of the world to go to the poorhouse in an automobile Will Rogers, an American writer, 1931. Rogers has a regular humorous column in an American magazine which was popular with ordinary people

Last summer, in the hot weather, when the smell was sickening and the flies were thick, there were a hundred people a day coming to the dumps … a widow who used to do housework and laundry, but now had no work at all, fed herself and her fourteen-year-old son on garbage. Before she picked up the meat she would always take off her glasses so that she couldn’t see the maggots.

From New Republic magazine, February 1933

There is not an unemployed man in the country that hasn’t contributed to the wealth of every millionaire in America. The working classes didn’t bring this on, it was the big boys … We’ve got more wheat, more corn, more food, more cotton, more money in the banks, more everything in the world than any other nation that ever lived ever had, yet we are starving to death. We are the first nation in the history of the world to go to the poorhouse in an automobile

Will Rogers, an American writer, 1931. Rogers has a regular humorous column in an American magazine which was popular with ordinary people

PSDs for the Wall Street Crash Counting the cost to rich Americans: The Vanderbilt family lost $40 million Rockefeller lost 80% of his wealth – but he still had 40 million left The British politician Winston Churchill lost $500,000 The singer Fanny Brice lost $500,000 Groucho and Harpo Marx (two of the Marx Brothers comedy team) lost $240,000 each Major losers in the crash

Counting the cost to rich Americans:

The Vanderbilt family lost $40 million

Rockefeller lost 80% of his wealth – but he still had 40 million left

The British politician Winston Churchill lost $500,000

The singer Fanny Brice lost $500,000

Groucho and Harpo Marx (two of the Marx Brothers comedy team) lost $240,000 each

Major losers in the crash