The Great Depression 03 26 2014 How bad was the Great Depression 23 unemployment rate o However some unemployed were not even considered unemployed o People that were employed were only employed part time o African American 50 or over were unemployed o People were living out of their cars on the streets o Hooverville people who lost their homes because they can not afford to pay their rent and their called hoovervilles because of president Hoover The Hoovervilles were shacks outside of cities were people lived o Things were continuing to get worse o Karl Marx predicted this o People started to believe that Marx was right o But capitalism did not die in the Great depression it almost did What triggered the Great Depression Great stock market crash however this is not really true There were a lot of underlying problems Speculation and the great bull market of 1928 1929 o This is a period where everyone wanted to buy a stock People were spending money that they did not have to buy a stock Americans knew they lived in the most propeserous country in the world They figured I will buy the stock now and will sell it later and it will be worth much more o Speculation the purchase of commodities based on their expected resale value A speculator says can I buy this and sell it for more late which everyone did during the Great o Many Americans were only buying small margins of stocks and the rest were bank loans but they thought this would not be a problem because they believed they would make a huge o Is there anyway we can stop this before the situation gets out depression profit of hand While they were trying to figure out how to stop this it happened on its own This was the Great Crash October 1929 Hielbroner tells you what happened People were trying desperately to sell their stocks because everything was crashing and banks were asking money Banks started to get really nervous so they were calling all these people Once your loan had been recalled you had no choice but to sell your stock so you can pay back your bank loan Stock market actually had to suspend trading until they could pile up bi orders Consequences of the Great Crash Cash Flow interrupted The cascade failure of American banking Investment interrupted o As bank started to fail it meant that less was to be borrowed or invested Houses are just sitting their because no one can buy them or invested 1 5 banks started to fail So less money was available and so were loans Drains even more money of the economy What caused the Great Depression and it last so long The economic consequences of the war and of the peace o American agriculture in boom and bust There was a boom because Europe was screwed after the war and they had to buy everything from Americans Demand for food does not really change when the prices go up People just get really mad If prices go down the demand for it does not really change either As the Europeans start to become productive again they do not have to buy it from Americans anymore The markets troubled child The paradox of inelastic demand The Dust Bowl These dust storms would be a mile high People could not leave their homes without suffocating Farmers would sit there and watch their top soil be blown away Hunger amidst plenty The soil is blown away and people can eat Professor showed a picture of people lined up at a soup kitchen o Europe s inability to be a strong trading partner War damage and debts They suffered more then America Failure of economic recovery Factories were shutting down o The role of neo mercantilism Passed protective tariffs Used to maintain jobs in their country but it made things worse because international o Marx would argue that the increase of technology would trade was cut off Technology employment and profits cause much exploitation Maldistribution of income Counter productive government response The Depression goes global Why didn t the system self regulate The world economy shrank for 4 straight years o Falling investment o The multiplier effect The money to invest simply was not there A relatively small decline in investment spending can spread through the economy o The circulation of money and the motivation of Economic man Economic Man does not invest money because he has money he invests money because he expects to make profit Why would you spend money if you have more money then anyone People did not really look at it like that The extra investment that was supposed to help did not the economy became worse and worse How did Keynesian economics propose to help The government can restart the economy and the economy will get better and better rather then worse The New Deal Programs SEC FDIC Social Security Employment programs How did the Great Depression affect the ordinary American Widespread persistent unemployment Attempts to maintain morale o Things like sherly temple movies and radio were there to make you happy and the radio was pretty much the only thing people could afford to do o President Roosevelt tried to make people happier and motivate them by going on the radio every weekend and saying we can do it Questioning the system question the system anymore o Some people really did blame themselves but they started to o They were questioning if the world really made sense to them o Is this really the best way of life in the world Should the government be involved in economic affairs 03 26 2014 03 26 2014