Warm Up:

Describe the events of “Black Thursday” and “Black Tuesday.”

Warm up:Define or describe the Reconstruction Finance Corporation, and the National Credit Corporation

Warm up:

What happened at the Bonus March?

Troubled Economy, Stock Market Crash, and 1932 Election

AP Chapter 25 (805-814)The student will understand the events involved the crash of the stock market, causes of the Great Depression, response by Hoover, and the 1932 election.

A. Warning signs of economic decline1.Increased productivity without increased wages2. Overproduction and full warehouses3. Declining farm prices throughout the 1920s4. Attention to the new consumer economy weakened traditional sector (RR, steel, textile, and mining)

ECONOMIC DANGER SIGNS: indications that the economy wasn’t as strong as thought. HOWEVER THEY WERE IGNORED BY MOST PEOPLE.•Huge corporations controlled most of the economy (top 200 businesses controlled 49% of American industry)

•Disparity of income:Wealth concentrated in the hands of a few families (0.1% of the population controlled a 1/3 of the wealth)

•Too many goods, too little demand (technology)

•Personal debt greatly increased because of installment plansinstallment plan: paying for goods over many months.

•Stock market speculation had many people taking risksspeculation: making high-risk investments in hopes of getting a high gain.

buying on margin: allows investors to purchase stock for only a fraction of its price (10 to 50%) and borrow the rest

•Buying on margin left stock owners without the ability to pay back loans once the stock market falls.

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•collapse of farm economy •Falling farm prices made farmers unable to repay their debts for land and machinery.•Real wages (actual purchasing power) declining

Dow Jones Industrial Average: an average of stock prices of major indus-tries

1.Crash A. Stock market dominated by over speculation and skyrocketing stock values; 9 million Americans speculated in the market, often with borrowed money (Buying on margin) 1. Black Thursday: Oct. 24, 1929 stock prices fell but were temporarily maintained by investment bankers purchasing stock (JP Morgan)

2. Black Tuesday: Oct. 29,1929 market crashes again with no rescueBlack Tuesday began when stockholders panicked because of a sudden drop in stock prices. The Dow Jones started at 299 thatday and fell to 230 by end of day; 25%.

Stock Market Crash: affected millions of America, even those who did not own stock.Stock Prices on Sep. 3, 1929/Nov. 13, 1929/1932 Low American Telephone 304 197 1/4 70 1/4General Electric 396 1/4 168 ½ 34 General Motors 72 3/4 36 7 5/8New York Central 256 3/8 160 8 3/4U.S. Steel 261 150 21 1/4Great Depression: a severe economic decline that lasted from ‘29 until WWII.

C. Reasons for a decline turning into a Depression 1. Structural weakness of the economy (see above) 2. Monetarist theory of Milton Friedman blaming the Fed Reserve for not increasing the money supply (repeat Fed Reserve regulatory role) 3.Serious dislocation in international trade due to poor European economy, tariffs, war loans

D. Results 1. GNP drops in half 2. Banking system near collapse 3. Unemployment increases (25% by 1933) and cuts in hours and wages (show overheads of prices and wages; see graphs page 811) 4. American people give the Democrats control of the Congress in 1930 and the Presidency in ‘32

Causes and effects of the Great Depression1. Govt. failure to regulate stock market speculation which allowed stock prices to skyrocket.

2. Decrease in consumer spending which ledto underconsumption of goods and services.3. Uneven distribution of wealth which limited the income of most families and worsened underconsumption.

5. Huge farm surpluses which led to drops in farm prices and a general slump in agriculture6. High tariffs and insistence on collectingwar debts which interfered with world tradeand destroyed foreign markets for Americanproducts.

4. Overproduction of goods which led tofalling prices and hardships for manufacturers

Causes and effects of the Great Depression

Gross National Product: total value of goods and services a country produces annually.GNP in 1929 dollars 1920-- 60 1925--80 1929--100 1930—901933-- 70 1937--100 1938-- 95 1939--100

By 1932 the nation’s manufacturing output stood at 47 percent of its 1929 level.

Impact on the world: collapse of the American economy led to a worldwide depression.

Bank closing:occurred in large numbers because banks could not return their depositors’ money.

Bank Failures 1929 659 1930 1,352 1931 1,456 1932 2,294 1933 5,190

Section 1-4

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Farm prices: because of the crash, prices dropped even more than they had in the 20s.

Tariffs: increased tariffs by the U.S. led to the collapse of world trade and further worldwide depression. Congress kept import taxes high to protect industries.

Corn $/bu. .77 .25 .26Wheat $/bu. 1.10 .40 .43Soybeans $/b 1.69 .37 .50Hogs $/cwt. 10.00 3.70 3.90Cattle $/cwt. 10.10 4.85 4.30Milk $/cwt. 2.50 1.40 1.30Chickens ¢/lb. .24 .12 .09Eggs ¢/doz. .29 .13 .12

1937 1940 1942 1.00 .63 .91 1.02 .74 1.21 1.26 .95 1.6110.0 5.60 13.55 7.90 8.10 11.12 2.05 1.85 2.60 .16 .13 .19 .20 .16 .29

1929 1932 1933

“Ralston Purina sales plummet from a 1930 high of $60 million to $19 million in 1932. In 1931 Ralston registers its first net loss — half a million dollars. According to Fortune magazine, ‘When 200-pound hogs brought only $12 ... farmers could not afford to buy commercial feed at any price.’”—Ralston Purina company

Notice cotton prices?

farms: when farmers could not pay their mortgages, many lost their farms through bank auctions.

Soil blown by "dust bowl“winds piled up in large driftsnear Liberal, Kansas.

"Destitute peapickers in California; a 32 year old mother of seven children. February 1936.“ by Dorothea Lange

Drought refugees camping by the Roadside Blythe, CA 1936 by Dorothea Lange

Dust storm by Robert Riggs

Dust Bowl video

sharecropper and wife. Mississippi. They have no tools, stock, equipment, or garden. 1937

The Depression in the South

For most cotton farmers the Depression goes

back to 1920 when the boll weevil and falling

cotton prices ruined many farmers and sent the

rate of tenancy soaring after several years of

decline.

•By 1930 Alabama contained 207,000 cotton

farms, 70 percent of them worked by white and

black tenant farmers.

•Non-farm employment declined by 15 percent

between 1930 and 1940, the highest rate for any

Southern state.

•The Birmingham industrial district was

hard hit, with employment declining in the city

of Birmingham itself from 100,000 to only

15,000 full time employees. Some national

observers contended that Birmingham was the

major American city most affected by the

Great Depression.

•During early stages of the national Depression

(1929-1933), both private charity and state

relief were overwhelmed by the magnitude of

suffering in Alabama. Families were disrupted.

•During a four-month period in 1933, detectives

working for the L&N Railroad expelled more

than 27,200 transients illegally riding freight

trains within the state's borders. Many

transients (between 40 and 45 percent) were

teenagers.

Unemployment as % of the Labor Force 1900 5 percent 1910 5.9 percent 1920 4 percent 1925 4.0 percent 1929 3.2 percent 1930 8.7 percent 1932 23.6 percent 1933 24.9 percent 1934 21.7 percent 1935 20.1 percent 1936 16.9 percent 1937 14.3 percent 1938 19 percent 1939 17.2 percent 1940 14.6 percent 1950 5 percent

M/C 1-2a

health: the Depression with its resulting poor diet and anxiety took a serious toll on the people including depression, anxiety, and suicide. The youngincreasingly suffered from malnutrition (18% malnourished in 1928 in NYC; 60% malnourished in 1931 in NYC).women: were less likely to get jobs because of the accusation that they were taking jobs away from men.

E. Hoover's response--caught between the belief that Depressions were "natural"/Republican belief in non- interference and experience in WWI 1. Voluntary corporate promise to maintain wages and employment 2. Urged municipal and state govt. to create jobs with public-works 3. Urged private charities to care for the unemployed coordination with the Emergency Committee for Employment

4. Set up the National Credit Corporation so that larger banks could loan to smaller banksbanks to make business loans. THESE failed so he tried, reluctantly, actual fed. govt intervention:5. Reconstruction Finance Corporation, Glass-Steagall Act, and National Credit Corporation to aid banks or businesses, but he feared "socialism“6. Tax increased to avoid unbalanced budget

Hawley-Smoot tariff: created the highest import tax in history to protect domestic industries from foreign goods and competition. The end result was a slowdown of international trade.

II. 1932 election A. Hoover blamed more and becomes more withdrawn with impersonal press released 1. Hoover blankets, Hoover flags, Hoovervilles—shantytowns of unemployed and homeless people 2. Bonus Expeditionary March— purpose was to obtain payment of money to veterans of WWI (see 812)

Hoovervilles or Homelessness:unemployed laborers created houses out of cardboard and tar paper; named after the president whom the people blamed.

Hooverville in Central Park

Family living in tent in Georgia, 1940

Handpainted sign on Bonus Army truck states: "We Done a Good Job in France, Now You Do a Good Job in America"

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Once I built a tower up to the sunBrick and rivet and lime.Once I built a tower, Now it's done.Brother, can you spare a dime?Once in khaki suits Gee we looked swellFull of that yankee doodle dee dum.Half a million boots went sloggin' through hellAnd I was the kid with the drum!Say don't you remember?They called me Al.It was Al all the time.Why don't you remember? I'm your pal.

Say buddy, can you spare a dime? Once in khaki suits,Ah, gee we looked swellFull of that yankee doodle dee dum!Half a million boots went sloggin' through hellAnd I was the kid with the drum!Oh, say don't you remember?They called me Al.It was Al all the time.Say, don't you remember?I'm your pal.Buddy, can you spare a dime? http://www.kcmetro.cc.mo.us/pennvalley/biology/lewis/crosby/brother.htmlhttp://bss.sfsu.edu/tygiel/Hist427/427sound/Crashsound/brother.html

Bonus Army: (1932) wanted immediate payment of pension bonuses instead of waiting until 1945.

See notes

B. FDR wins with energy and a promise of a New Deal; he also attacked Hoover for reckless spending and said govt. should only get involved as last resort; pragmatistC. Disagreement between two most strong over federal relief to individuals

1932 election: historic battle between those who believed that the federal government could not and shouldn’t try to fix people’s problems, and thosewho believed that the Great Depression demanded a more responsible govt. with major federal intervention. Ultimately many Americans for the first time turned to the federal government as their only hope.