1. Rajesh Mudaliyar &
Rahul Chaudhary
The Great
Depression 1929
SMBA: 7

2. What makes a Depression Great?
 Recession: When your neighbor loses his or her job.
 Depression: When you lose your job.

3. STOCK PRICES RISE THROUGH
THE 1920s
 Through most of the
1920s, stock prices rose
steadily
 The Dow reached a
high in 1929 of 381
points (300 points
higher than 1924)
 By 1929, 4 million
Americans owned
stocks
NewYork Stock Exchange

4. THE STOCK MARKET
 By 1929, many Americans
were invested in the Stock
Market
 The Stock Market had
become the most visible
symbol of a prosperous
American economy
 The Dow Jones Industrial
Average was the barometer of
the Stock Market’s worth
 The Dow is a measure based
on the price of 30 large firms

5. SEEDS OF TROUBLE
 By the late 1920s, problems
with the economy emerged
 Speculation: Too many
Americans were engaged in
speculation – buying stocks &
bonds hoping for a quick
profit
 Margin: Americans were
buying “on margin” – paying
a small percentage of a
stock’s price as a down
payment and borrowing the
rest
The Stock Market’s bubble was about to
break

6. THE 1929 CRASH
 In September the Stock Market
had some unusual up & down
movements
 On October 24, the market took a
plunge . . .the worst was yet to
come
 On October 29, now known as
BlackTuesday, the bottom fell out
 16.4 million shares were sold that
day – prices plummeted
 People who had bought on margin
(credit) were stuck with huge
debts

7. FINANCIAL COLLAPSE
 After the crash, many
Americans panicked and
withdrew their money from
banks
 Banks had invested in the
Stock Market and lost
money
 In 1929- 600 banks fail
 By 1933 – 11,000 of the
25,000 banks nationwide
had collapsed
Bank run 1929, Los Angeles

8. GNP DROPS, UNEMPLOYMENT
SOARS
 Between 1928-1932, the
U.S. Gross National Product
(GNP) – the total output of a
nation’s goods & services –
fell nearly 50% from $104
billion to $59 billion
 90,000 businesses went
bankrupt
 Unemployment leaped from
3% in 1929 to 25% in 1933

9. CAUSES OF THE GREAT DEPRESSION
 U.S. demand
low, despite factories
producing more
 Farm sector crisis
 Easy credit
 Unequal distribution
of income
 American Economic
Policy with Europe

10. RURAL LIFE DURING THE
DEPRESSION
 While the Depression was
difficult for everyone,
farmers did have one
advantage; they could
grow food for their families
 Thousands of farmers,
however, lost their land
 Many turned to tenant
farming and barely scraped
out a living
Between 1929-1932 almost ½ million
farmers lost their land

11. EFFECTS OF DEPRESSION
 Suicide rate rose more than
30% between 1928-1932
 Alcoholism rose sharply in
urban areas
 Three times as many people
were admitted to state
mental hospitals as in normal
times
 Many people showed great
kindness to strangers
 Additionally, many people
developed habits of savings &
thriftiness

12. 1929-1932
Indicators
United
States
Great
Britain
France Germany
Industrial production –46% –23% –24% –41%
Wholesale prices –32% –33% –34% –29%
Foreign trade –70% –60% –54% –61%
Unemployment +607% +129% +214% +232%

13. HOOVER’S PHILOSOPHY
 Hoover was not quick to
react to the depression
 He believed in “rugged
individualism” – the idea that
people succeed through their
own efforts
 People should take care of
themselves, not depend on
governmental hand-outs
 He said people should “pull
themselves up by their
bootstraps”
Hoover believed it was the individuals job to take
care of themselves, not the governments

14. HOOVER TAKES ACTION: TOO
LITTLE TOO LATE
 Hoover gradually softened his
position on government
intervention in the economy
 He created the Federal Farm
Board to help farmers
 He also created the National
Credit Organization that helped
smaller banks
 His Federal Home Loan Bank Act
and Reconstruction Finance Corp
were two measures enacted to
protect people’s homes and
businesses
Hoover’s flurry of activity came too
late to save the economy or his job

15. Impact Of Depression In Indian Economy
The effect of depression was
felt through a sharp decline in
agricultural prices and a severe
pressure on the balance of
payment of the country.
It did not affect industrial
output considerably or direct
employment because the
newly adopted policy of
protection has given Indian
industry a shelter in domestic
market and also there was
diversion of demand from high
priced imports to low priced
Indian goods.

16. Agriculture
 Income fell in Agriculture
prices not because of
output but a fall in prices.
 Food crops to Cash
crops cultivation.
 Restrictions on Cash
Flow.
 Boycott of foreign goods.

17. WORLDWIDE EFFECTS
 Australia
 Australia's extreme dependence on
agricultural and industrial exports meant it
was one of the hardest-hit countries in the
Western world
 Falling export demand and commodity
prices placed massive downward pressures
on wages
 Further, unemployment reached a record
high of almost 32% in 1932
 After 1932, an increase in wool and meat
prices led to a gradual recovery

18. WORLDWIDE EFFECTS(CONT…)
 Canada
• Harshly impacted by both the
global economic downturn and the
Dust Bowl,
• Canadian industrial production had
fallen to only 58% of the 1929 level
by 1932, the second lowest level in
the world after the United States
• Total national income fell to 55% of
the 1929 level, again worse than
any nation apart from the United
States.

19. Germany
 Germany'sWeimar Republic was hit
hard by the depression, as American
loans to help rebuild the German
economy stopped.
 Unemployment soared, especially in
larger cities, and the political system
veered toward extremism.
 Hitler's Nazi Party came to power in
January 1933. In 1934 the economy was
still not balanced enough for Germany
to work on its own.

20. Latin America
 Because of high levels of United States
investment in LatinAmerican economies,
they were severely damaged by the
Depression
 Chile, Bolivia and Peru were particularly
badly affected
 One result of the Depression in this area
was the rise of fascist movements.

21. East Asia France

22.  Outbreak of WorldWar II
causes
 US factories flooded with orders
form armaments and munitions
 Unemployment decreases and
production increase
 Depression ends completely by
the time the US enters the war in
1941
End to Depression

23. Countries Depression Began Recovery Began
United States 1929:3 1933:2
Great Britain 1930:1 1932:4
Germany 1928:1 1932:3
France 1930:2 1932:3
Canada 1929:2 1933:2
Italy 1929:3 1933:1
Belgium 1929:3 1932:4
Netherlands 1929:4 1933:2
Sweden 1930:2 1932:3
Denmark 1930:4 1933:2
Japan 1930:1 1932:3
Poland 1929:1 1933:2
India 1929:4 1931:4
Brazil 1928:3 1931:4
South Africa 1930:1 1933:1

24. What did we learn from the
1929 Crash?
 Market can be very unpredictable
 Investors must not get caught up in market
bubble illusions
 Market forces alone may be unable to achieve
recovery from economic slump
 Changes were needed in US economic structure

25.  The Depression was not a failure of capitalism or
markets, but rather a failure of the Federal
Reserve.
 Monetary policy should maintain price stability –
avoid deflation and inflation.
 The Fed should respond to financial crises that
increase the demand for money or threaten to
disrupt the payments system.
Could It Happen Again?

26. Does
History repeat….?
Thank
You