The fall and depression…

What caused a slowdown in the economy by the end of the 1920s?

The industrial workers saw their wages increase it did not keep up with the price increase of goods. This reduced the demand for these goods. As the demand fell, workers were laid off and the spiral continued. Healthy industry began to slow (construction and automobile). The farm industry was on of the most distressed and merited the most focus. Overproduction on the farm kept prices low.

How did the candidates for president in 1928 differ?

-Hoover was the candidate for president on the republican side. He had helped greatly with the relief effort in World War 1 and with business. He represented a self made man and the protestant westerners. He felt that the problems of the nation economically could be solved by hard work and not government support.

-Al Smith, the son of an Irish immigrant born in the city, was the Democratic candidate. He was born and bred in the city and felt the government should be active in the support and betterment of the economy.

-Hoover won as a testament by the people that they believed the economy and the US were doing well.

Why did the stock market crash in 1929?

The investors in the twenties would buy stock in hopes that the prices of stock would rise and they would be able to sell to make a profit. Investors would sometimes borrow the money from the brokers to pay for the stock (to buy stock on margin). Yet stocks began to soar in price near the end of the twenties. Cautious investors began to believe that the prices were inflated and began to sell. This dropped the price of the stocks. When this happened, more people began to sell. As prices dropped more the brokers made margin calls (they asked for money back from those who bought on margin). The banks then called the loans that the brokers had taken to buy the stocks. As all brokers and investors sold stocks desperately to save money, the prices plummeted and the market crashed.

What does on margin mean? What is a margin call?

See above.

What caused the great depression?

The fall in demand and the increase in supply helped to cause the depression. Mass production caused a surplus in the market on goods. Wage increases did not keep up with the price of goods and a weak farm industry meant that farmers could purchase little. Many items produced were also durable goods. These items were designed to last several years before they needed to be replaced. By 1929 people already owned these goods or could not afford them. Business inventories (the goods on the shelf in the stores) remained the same, factories made less, and laid off workers, workers bought less, the spiral continued.
Bank failure also contributed to the depression. The crash of the stock market caused some banks to fail when the brokers could not pay back their loans. When banks failed people no longer made deposits, then many began to run on the bank (withdraw all of their money) and more banks failed. International investors also removed money from banks and caused repercussions throughout Europe.

How did the depression affect business?

Industrial areas suffered greatly. Payrolls dropped and unemployment soared. The unemployed bought little more than food, so housing construction and accessories (radios, cars, clothes) came to a halt.

What impact did unemployment have on society?

In earlier depressions people lived on farms and could grow their own food. The industrial society did not have this luxury. People lost their view of self worth and many were reduced to living in shacks and

What are durable goods and what is a business inventory?

See above.

Instruction:

Slowdown of the economy.

--wages vs, goods

--jobs fall –

-- Farm overproduction

Presidential candidates.

Hoover – ww1 – solve it with hard work.

Al Smith – Born in the city – Active government

The Stock market

Buy some stock
Buy some stock “on margin”
prices soar
Start to sell
Sell sell sell
“Margin call”
Bank call
Sell Sell Sell
crash…..

Assignment:

Page 559

1 -- 6. Due on Wednesday.