Great Depression and -the Automobile Industry Essay

Submitted By steven-whitehurst
Words: 6024
Pages: 25

New Deal

Economy in the 1920s
-The decade of the 1920s saw a tremendous rise in the stock market and the economy was prospering.
-Henry Ford was a manufacturing genius and knew how to make cars that people could afford.
-The automobile industry became one of the most important industries in the nation.
-It stimulated growth in many related industries, such as steel, rubber, glass, tool companies, and gasoline.
-The 1920s was a period in which many men and women could afford not only the means of subsistence, but a considerable amount of what they wanted.
-Middle class families purchased new appliances such as electric refrigerators, washing machines, electric irons, and vacuum cleaners.
-Women purchased cosmetics and mass produced fashions.
-Agriculture in the 1920s, like industry, was embracing new technologies. The number of tractors on American farms quadrupled during the decade.
-These new technologies greatly increased agricultural production, but the demand for the goods was not rising as fast as the production.
-This resulted in substantial surpluses, a decline in food prices, and a severe drop in farmers’ income.
-More than 3 million people left agriculture altogether during this decade. Of those who remained, many lost ownership of their land and had to rent instead from banks or other landlords.
-Because of this, many farmers began to demand relief in the form of government price supports.

Stock Market Crash
-The Federal Reserve expanded the money supply during the 1920s by about 80 percent.
-Prices went up some, but not by 80 percent. Most of the extra money was getting sucked into the stock market causing stocks to go up and stocks were going up more than ever before, more than anyone had ever seen.
-The average person in the 1920s didn’t invest in the stock market like they do today, but those who did invest made a lot of money.
-Many people bought stock on margin. This is taking a loan to buy more stock than you can really afford, with the stock being the collateral for the margin loan.
-Some people were getting rich from buying on margin.
-In February 1928 stock prices began a steady rise that continued, with few temporary lapses, for a year and a half.
-Trading grew from 2 or 3 million shares a day to over 5 million, and at times 10 or 12 million.
-In 1929 things took a turn for the worst as the stock market went south.
-Why did that happen? It’s hard to explain why stock markets do what they do (like a herd of animals in the wild, the slightest thing can spook them). The Federal Reserve saw that it had created a monster, the economy was kind of like a runaway train (they had blown a giant bubble with the inflation and are trying to suck the air out of it without it popping in their face, it doesn’t work).
-In October 1929 the stock market loses a huge percentage in one day.
-On October 21 and 23 there were alarming declines in stock prices, but both cases were followed by temporary recoveries.
-On October 29, known as “Black Tuesday,” all efforts to save the market failed and in the months that followed it continued to decline.
-It would remain deeply depressed for more than four years and would not fully recover until the 1940s.
-Some people even jumped out of windows in response to the crash, having lost everything.
-Stock began to drop to less than the marginal loans people took out on them. They now had no collateral and had to come up with liquid money (cash) to pay the difference. People began to sell everything to come up with the money, they pulled money out of the banks, and some banks went under and then people lost their money in those banks.
-The disaster at the upper end of the economy trickled down to the rest of the economy.
-Businesses began going under, factories were closing, creating lot of unemployment, and people began lining up to get unemployment relief.
-What happened to the rich had repercussions throughout the economy and many suffered as…