• In the 1920’s it was a Bull market. Many people bought stocks on margin-they borrowed money to buy stocks and only put a small amount down as a payment.
• For example: With $1,000, an investor could buy $10,000 worth of stock. The other $9,000 would come as a loan from a stockbroker—he would hold the stock as collateral.• As long as the price kept rising buying on margin was safe because you always made money. It only took a short time for prices of stocks to rise and investors could pay back loans.
The Great Crash• The bull market lasted only as long as investors continued putting new money into it. By the latter half of 1929, the market was running out of new customers. Professional investors sensed danger and began to sell off their holding. Prices slipped. Others followed and prices fell even more.
Black Tuesday• October 29, 1929, prices took the steepest dive.• If you had $1000 on 3 September 1929, it would have been worth only $108.14 (89.2% loss) by July 8th, 1932. Full recovery of this loss didn’t occur until 1954, 22 years later
Bank Failures• The Crash hurt banks in two ways:• ----banks had lent money to investors• ----banks had invested in the Stock Market• Banks lost tons of money—people panicked and ran to their banks to get their money out of savings—money was gone!!!!
• During the first two years of the Depression, more than 3,000 banks were forced to close
Causes of the Depression#2Overproduction of goods:Efficient machinery increased the production capacity of both factories and farms. Low consumption of goods led manufacturers to cut production and lay off employees.
A vicious cycle Over Lay off produce workers goodsLay off No money more to buyworkers goods Produce fewer goods
Causes of the Depression• #3• Uneven distribution of Income• In 1929 2/3 of families earned less than $2,500 a year, leaving them little expendable income.
Causes of the Depression• #4• Decline in Export Sales:• Hawley-Smoot Tariff put large tariffs on imports. Americans did not buy foreign goods because they were too expensive and foreigners did not buy Americans goods as well.
Causes of the Depression• #5• Mistakes by the Federal Reserve:• During the 1920’s the Federal Reserve made money very cheap to borrow (low interest rates) but after the crash they rose the interest rates—tightening up credit.
Life During the Depression• The Depression grew steadily worse. In 1932 some 9,000 banks had failed and over 30,000 companies went out of business. By 1933 ¼ or 25% or 1 in 4 people of the workforce were unemployed.
• President Hoover believed that government should not interfere in the economy. His reputation suffered as his administration did nothing for the people.
Hobos• In search of work or a better life, many men began to wander around the country, walking, hitchhiking “riding the rails”.• They developed intricate symbols that they wrote on trees, fences, or building to warn or inform other hobos.
Because President Hoover did nothing his name becamesynonymous with the depression• http://youtu.be/sfylLnHjcu0• http://youtu.be/TZz7mwvmm7A
• Hoovervilles were shantytowns• Hoover blankets were newspapers• Hoover flags were empty pockets
• Farmers soon faced a new disaster. Beginning in 1932, a terrible drought struck the Great Plains. The soil dried to dust and winds whipped the arid earth up, blowing it around and blackening the sky for hundreds of miles. Dust buried crops and livestock and piled up against farmhouses like snow. No matter how carefully farm families sealed their home, dust covered everything in the house.
• Film about the dust bowl• http://youtu.be/csnY0Tnvdj8• http://youtu.be/xAQsGdcLl4c
• Many families packed all their belongings into old cars or trucks and headed west to California, hoping for a better life. Since many migrants were from Oklahoma, they became known as “Okies”. John Steinbeck immortalized their story in his best seller the Grapes of Wrath.• http://youtu.be/jE6kKwUjb_c
Escaping the Depression• Ordinary citizens often went to the movies to escape to see people who were rich, happy and successful. In the early 1930’s:• Animal Crackers-Marx Brothers• http://youtu.be/8CQHOCsOfWw• Walt Disney’s Snow White and the Seven Dwarfs• Gone with the Wind
Bonus Marchers• In appreciation of the World War I service of American soldiers and sailors, Congress in 1924 had enacted a $1,000 bonus for each veteran, to be distributed in 1945. Many veterans marched to Washington D.C. to ask that they receive their bonus early. Over 1500 camped out near the White House. President Hoover sent the police to clear them out. When that didn’t work, he called in the Army. Soon unarmed veterans were on the run with 700 soldiers at their heels. Their campsite was buried to the ground. It was a public fiasco for Hoover.