CHAPTER 18

THE GREAT DEPRESSION BEGINS(1929 - 1932)

THE GREAT DEPRESSION

A time period of incredible economic hardship that devastated the United States

during the 1930s

18.1 – THE CAUSES OF THE GREAT DEPRESSION

see your graphic organizer for this section

WHAT IS THE STOCK MARKET?

The arena in which publicly owned companies are issued and traded through the

buying and selling of stocks (a share of the company)

WHAT IS A BULL MARKET?

A market in which prices are rising, generally over a longer period of time

WHAT IS A BEAR MARKET?

A market in which prices are falling, generally over a longer period of time

WHAT IS BUYING ON MARGIN?

Making a down payment for a stock, not paying full price up front (ex. For 10% down, you could “buy” $10,000 worth of stock with only $1,000). The other $9,000 is loaned to

you buy the stockbroker.

WHAT IS A MARGIN CALL?

When the stockbroker demands the loan be paid back……..uh-oh

Risk of buying on margin• You want to buy $100 worth of stock but only have $20

• You buy on margin, put up the $20 and borrow the other $80 from a broker

• The stock soars to $200. You sell, repay the $80 loan and now have $120 in your pocket. You spent $20 to start, so you made $100(not bad!)

• The stock plummets to $20. You sell but have $0 left because you paid $20 to buy and sold for $20, leaving you nothing. BUT, you still have to repay the loan of $80, where do you get the money to repay?????

WHAT IS SPECULATION?

Taking risks/making bets that the market will continue to rise and buying/selling stocks

accordingly. Basically, betting on the future.

HOLD OR SELL?

You and your spouse have decided to spend part of your savings on stock. Stocks are all the rage and you see everybody else making so much more money on stocks than on lower interest rates in your savings account, so why not buy stock? You don’t have quite enough cash to buy as much as you want, so you decide to take out a loan. You already bought a car and a fridge with credit (basically a loan), and nothing bad happened, so what’s the real risk? After much discussion you decided to purchase $10,000 worth of Ford Motor Company, but you only put $1,000 down. Fred, your stockbroker, is loaning you the other $9,000. Now you have to decide, as you monitor the stock, to hold it or sell it. Good luck!

DAY 1

Your stock is at $10,000

DAY 6

Your stock is at $10,200

Hold or sell?

What is your profit/loss?

DAY 11

Your stock is at $10,300

Hold or sell?

What is your profit/loss?

DAY 16

Your stock is at $11,000

Hold or sell?

What is your profit/loss?

DAY 21

Your stock is at $10,800

Hold or sell?

What is your profit/loss?

DAY 26

Your stock is at $10,550

Hold or sell?

What is your profit/loss?

DAY 31

Your stock is at $10,450

Hold or sell?

What is your profit/loss?

DAY 36

Your stock is at $10,600

Hold or sell?

What is your profit/loss?

DAY 45

Your stock is at $6,000

Hold or sell?

What is your profit/loss?

DAY 51

Your stock is at $1,000

Hold or sell?

What is your profit/loss?

WHAT IS A BANK RUN?

When depositors are worried their bank is running out of money so they RUN to the back to withdraw their money. When everybody does this at once the bank can’t handle it

and people can lose a lOT of money.

THE CRASH OF 1929

The value of stocks plummeted and people lost a ton of money. Black Thursday (October 24) - SM plummeted, a panic ensued. Black Tuesday (October 29) – the SM lost

between $10-$15 billion in value.

18.2 – LIFE DURING THE DEPRESSION

• GD led to massive loss of jobs and property

• Worsened during Hoover’s administration

(ex. 1932 – 30,000 companies go out of business)

• People turn to bread lines, soup kitchens, YMCAs…

• People lost homes and shantytowns popped up (why did they call them Hoovervilles?)

• People wandered from place to place looking for work, food, shelter….(hobos)

18.2 – THE DUST BOWL (read pp. 638-639)

• Dust Bowl refers to the “fruitless” land/fields

• Wind storms could be deadly, leading to blackening skies, suffocation, destruction of existing crops…

• Led to “interesting” actions such as rabbit drives

• Many who lost their farms headed to California for work– Okies

• DB was a result of several things:– Homesteading– Drop in crop prices– Draught hitting the Great Plains

18.2 – ENTERTAINMENT

• People turned to entertainment as an escape from the worries/stresses of the GD

• Movies, radio plays, comic books, superhero (Superman and Batman in the late ’30s)

HOLLYWOOD

• Millions attended movies

• Comedies provided escape

• Stars such as Jimmy Stewart, Shirley Temple and Groucho Marx

• King Kong (1933)

• Wizard of Oz (1939)

• Gone with the Wind (1939)

• Walt Disney emerges in late ‘20s– Mickey Mouse (1928)– Snow White (1937) – first feature length

animated film

RADIO

• Radio provided daily entertainment – sort of like TV today? – Creates common culture, shared

experiences…

• Comedians such as Jack Benny and George Burns

• Superheroes included the Lone Ranger and the Green Hornet

• Emergence of soap operas (Guiding Light)– why were they called soap operas?

George Burns

LITERATURE & ART

• Artists/authors portrayed the life surrounding them

• John Steinbeck– Grapes of Wrath focuses on Okies and Dust Bowl

• William Faulkner– The Sound and the Fury (used stream of

consciousness…what is that?)

• Images were becoming more influential, photographers captured daily life and struggles

• Life – introduced in 1936 by Henry Luce

• Painters such as Grant Wood depicted traditional American values– American Gothic

18.3 – HOOVER RESPONDS TO THE DEPRESSION

• HH was optimistic things would get better soon after the Crash

• Believed gov’t had a role but did not favor “direct” aid to individuals– Faith in “rugged

individualism”– Fear of socialist policies in

Europe after WWI– Feared deficit spending (what

is this?)

Herbert Hoover

18.3 – HOOVER RESPONDS TO THE DEPRESSION

• Held conferences w/ leaders of business, banks, RRs, labor…

• Increased funding for public works projects– Did not create enough jobs– See graphic organizer for specific

policies

• Although Hoover failed to pull the country out of the depression he was actually a very “active” president; did a lot to expand the role of the Federal gov’t, especially for that time but critics say he did not do enough