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The Great Depression

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by

Edwin Choo

on 24 September 2013

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Transcript of The Great Depression

Herbert Clark Hoover
Address budget deficit
Raise tax
Reduce government spending
Increase interest rate
Expansionary Fiscal Policy
Decrease tax
Increase government spending
To stimulate production and growth
Impacts
World output and industrial production
International trade & growth
Unemployment & wages
Economic
Standard of Living
Crime & unrest
Glass-Steagall Act
THE GREAT DEPRESSION
Corrective Measures
INTERNATIONAL FINANCE NEWS
Lessons Learnt
Implemented during Roosevelt Presidency

3 Main Goals :

Recovery
Relief
Reform
The New Deal
Theories
Causes Of The Crisis
ECONOMIC IMPACTS OF
FIRST WORLD WAR
What, How And When
The Crisis Unfolded

Banking And Relief Emergency Act
Nationwide Bank Holiday

Government Assurances To Provide Unlimited Currency To Banks

Restore Faith In Banking System

Choose between Investment Banking Or Commercial Banking



Laid the foundations for the creation of the Federal Deposit Insurance Corporation
US STOCK MARKET CRASH AND SUBSEQUENT BANK FAILURES
POOR ECONOMIC POLICIES
The Social Security Act
Influenced by John Maynard Keynes

Government spending increases consumption

Increase in AD leads to increase in production and hence employment.
A way for old people to make ends meet
U.S.A.’s economy grew tremendously during the war, and gold reserves had risen as U.S. emerged as the world’s biggest creditor
Many Americans participated in the wave of prosperity through the stock market, aided by low credit margins.

Initially, everyone was a winner as stock prices went up and this attracted more investors but eventually, the market turned into a bubble.

On October 24th 1929, Black Thursday, the Dow Jones Industrial Index plunged, falling further the next day and losing more than 20% of its value within two days.
Civil Conservation Corps
A popular work program for unmarried and unemployed young men

Planted trees, improved infrastructure, built state parks

Prevented soil erosion
EUROPE
Great Depression
investors run up debts that they probably could not repay
So that investors can ride on the wave of growth
Glass-Steagall Act
Stringent Credit Policy
assess their creditworthiness and the amount of leverage each could undertake
to establish strict control measures for both the individual investors and the industry
prevent the widespread bank runs and failures
Address budget deficit
Raise tax
Reduce government spending
Increase interest rate
Theory of Comparative advantage
World output and industrial production
Dramatic decline in both
Demand shrank and credit squeeze; people chose to save
US output index fell by more than 25% in 3 years
Unemployment and wages
Unemployment rose dramatically. Accompanied by declining wages.
Rough 4.5 times increase in unemployed from 1930-33
Wages fell across wide industries
International trade and growth
Trade barriers setup, export economies heavily hit
World trade sank by 60% in 3 years
Led to fall in revenues and prices
Economic
Social
Political
Fixed Exchange Rate
Restricts ability to adjust money supply
Expansionary Fiscal Policy
Reduce tax
Increase Government Spending

Credit Policy
Standard of living
Less food and necessities
Education neglected
Crime and unrest
General sense of unhappiness
Political upheaval
Loose Credit Policy
Cooperation
Lack of Cooperation
Consider only private interest instead of the global interest
US increased tariffs, ignoring that other countries were dependent on trade with US
detrimental to their individual recovery efforts
Interconnectedness

look at the global picture
understand the impact each country's decision has on others
increase economic cooperation for growth and recovery
Trade benefits all trading partners
No barriers to trade
Smoot Hawley Tariff
trade wars
Assumption:
Rational
Expectation
Prices were on a uptrend
Reckless investing
Huge bank withdrawals led to bank failures
as banks had insufficient currency reserves.
Suspension of Gold Standard during War
Reverting to Gold Standard after War
certainty
The gold standard
WORLD TRADE AND AMERICA'S PARTICIPATION
1929 1930 1931 1932
1) The US stock market crash was of the factors that led to the Great Depression. In which year did it happen?


a) 1928
b) 1929
c) 1930
d) 1931

2) Which factor did not contribute to the Great Depression?


a) WWI
b) Loose Credit Policy
c) Lack of cooperation between countries
d) WW2


3) What problem did Herbert Clark Hoover, the 31st president of US feel was the most pressing problem to resolve that led to wrong implementation of policies?

a) To resolve budget deficit problem
b) To curb inflation
c) To curb deflation
d) To increase country's production

Plenty suffered from poverty and famine
Riots, protest and theft
Bolstered support for socialist and nationalist parties
Hoover unpopular with public, replaced by Roosevelt
Global Economy Hit Hard by Impact of Crisis
_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________________________________________________
Q & A
Implementation of policies
Hoover

Roosevelt
Full transcript