The Great Depression 1929 1941 25 unemployment 50

The Great Depression � 1929 -1941 � 25% unemployment � 50% for African-Americans �Franklin Delano Roosevelt (D) elected in 1933 �Begins New Deal �Changes role of government �Before, government believed its job was to support business �After, government took an active role in the welfare (health) of its people �Social Security �Unemployment �Later: medicaid, free reduced lunch

How did we get here? �What are some short term effects of economic troubles? �Social / Cultural �Political �Economic �How could a prolonged depression impact us long-term? �Social / Cultural �Political

The Roots of the Great Depression What caused the stock market crash of 1929? What other factors brought about the Great Depression?

The World Before �Those with money were investing in the stock market �“Roaring 20 s!” �Emergence of middle class �Luxury goods markets �Average Americans saw little to no change in income �Society liberalizing �Music, fashion, mores, women

Stock Market �When you buy stock you own a part of the company �As company makes money, so do you �Chipotle went from $18 to $100 Investors bought on margin Borrowed money to buy stock Could make major $$ Or lose badly! �Dow Jones goes from 60 to 400 during 20’s �Many put life savings into stock �Most don’t do research

The Crash �The bubble bursts on “Black Tuesday” �October 29 th 1929 In part caused by declining home prices and values and real estate bubbles Eerie! �Much of stock value is based on investor confidence �If people don’t believe in it, value drops �People began abandoning what they saw were sinking ships "We are broke. Last April I was worth $100, 000. Today I am $24, 000 in the red. "

So what? �How could a decline in the stock market affect average people? �People who have savings in stock suddenly have none �Consumer confidence drops �Americans pull back on spending �Less spending means businesses have to lay off people People begin to pull money out of banks Those banks run out of money Average people lose their savings People without money don’t

The Crash Leads To Depression Over 9, 000 banks fail during the 1930 s Bank Runs! Savings and money wiped out Trade drops Smoot-Hawley Tariff America tries to protect its industries Buying power of average American drops Industrial production down 50% Ecological disaster Farmers go bankrupt Drought + prices Unequal distribution of wealth Rich lose, poor still losing Banks unregulated Make risks, and lose it all

GDP = C + I + E + G �GDP stands for Gross Domestic Product �Value of all goods and services created in a country �C = Consumer spending �I = Investment by industry (stuff made, purchased) �E = Excess of exports over imports (you want more exports) �G = Government spending �Question:

Year GDP in billions Unemployme nt rate Federal Spending in billions 1929 $203. 6 3. 2% $3. 1 �Started amidst prosperity, left 1930 $183. 5 8. 7% $3. 3 1931 $169. 3 15. 9% $3. 6 1932 $144. 2 23. 6% $4. 7 1933 $141. 5 25% $4. 6 Herbert Hoover � President 1928 -1932 as a national shame �Last Republican until 1952 � Believed the market would correct the depression �Core beliefs fundamentally different than what was needed �Faith in the “invisible hand” � During Hoover’s Presidency the Depression worsened drastically �Little government intervention �Government spending as part of GDP

Questions Causes of Great Depressio n What factor of GDP do you think was most hurt by the stock market crash? 1. Why do you think so? Using the GDP formula, how would you stimulate the economy? 3. What new laws would you propose to prevent this from happening again? 4. Interpret the cartoon to the left. What is the message of the 2.

�What caused the stock market crash of 1929? �What other factors brought about the Great Depression?