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Depression Causes — Transcript

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0:00topic here depression causes so what you
0:02want to do is
0:03uh get ready to generate your list for
0:06the depression
0:08what contributing factors led to the
0:11economic crisis in the 1920s going into
0:13the 1930s
0:15so um there will be a google form that
0:17you can complete to kind of check your
0:19understanding of this
0:21information um the answers will be
0:23provided there
0:25and i'm going to first start off with
0:26this particular slide here understand
0:28that there is not
0:29one specific cause for the depression
0:32you might think of the stock market
0:34crash as the
0:35cause for the depression but there are a
0:37lot of long-term causes for the
0:39depression
0:40looking at this particular slide i just
0:42given you a couple of uh
0:44statistics 80 of americans don't have
0:46money in savings
0:47that tells me they're going to depend on
0:49jobs you know there's a lot of poor
0:51people
0:51in comparison to rich
0:55and 70 are not earning what they need to
0:57survive
0:58keep in mind during the 20s you have a
1:00lot of access to credit and credit is
1:02creating
1:03possibly a false sense of security
1:07so with that let's get into uh
1:10this screencast here so i want you to
1:13think about
1:14these scenarios and really all you're
1:16going to do is think about
1:18if this is going to be an economic boom
1:20or an economic bust or if it's going to
1:22help the economy
1:23or is the situation going to hurt the
1:26economy so if you look at this
1:27particular example here world war one is
1:29over
1:30during world war one we did talk a lot
1:31about the jobs that were created during
1:34um the war you know you're making tanks
1:36you're making mass
1:37and this particular statistic uh chart
1:39here you see the amount of uh
1:41trade going to uh participants during
1:43world war one
1:44it's a lot of money think about it all
1:46of these uh
1:48uh trade transactions are going to
1:50create a lot of jobs so
1:51um there is another screencast that
1:53talks about the model the business cycle
1:55so i'll reference this here but
1:56it might not make sense unless you watch
1:58that one first
2:00anyway so world war ii plus it's right
2:02here at b
2:03there's jobs being created that is going
2:05to increase business production which is
2:07going to provide wages and then
2:08workers are then going to spend save
2:10invest so the loss of world war
2:131 jobs being over that is going to be a
2:15bus which is why i put the arrow down
2:17here
2:18there's less war goods that's going to
2:20mean less jobs
2:21that's going back to world war one
2:23easily accessible
2:24credit so i know in the 1920s credit is
2:27readily available people are buying
2:29a bunch of items so they could uh have
2:31some sort of sense of
2:33social status within society i did a
2:35google search here just typed in 1920s
2:37and credit
2:38and you can see some of the information
2:39here so credit is actually going to
2:41create a boom
2:42so we would be here on the model of the
2:45business cycle
2:46uh keep in mind when world war one is
2:48over we would be
2:49over here the economy is going to start
2:51going down in this particular situation
2:53in the 1920s
2:55credit is creating a boom because that
2:56means people are going to be in a
2:58position where they can buy
2:59items now keep in mind i am not talking
3:01about their ability to pay back what
3:02they're taking out on credit but keep in
3:04mind that they are making purchases
3:06and businesses are going to meet that
3:08demand so this is an
3:09arrow going up this is a boom and we
3:11would be right here
3:12uh keep in mind it is a little different
3:14they really don't have wages so they
3:16would be spend saving and investing so
3:18this arrow right here would go up
3:20which then would force business
3:21production and then those workers are
3:23going to get a wage
3:25uh so that's 1920s credit and i think
3:28about an hour simulation
3:30looking at what we've been doing day one
3:31day two three and four
3:33uh the easily access to easy access to
3:36credit has allowed like for day three
3:37143 dollars have been purchased
3:40using credit so that right there is
3:42going to create a boom keep in mind it's
3:44giving consumers the opportunity to be
3:46able to spend
3:47i'm not talking about their ability to
3:48pay it back but the reality is they
3:50are spending so this economy seems to be
3:52fueled by credit
3:53what about advertisements we talked a
3:55lot about advertisements so
3:56advertisements are going to be a boom
3:58because that is going to persuade
4:00americans to buy
4:01when you combine the ads with their easy
4:04access to credit
4:05that means that people are going to be
4:06in a position where they spend so the
4:08ads is going to be a boom it's going to
4:10be something that is going to
4:11get the economy moving upward so that
4:14would place us here when you combine
4:16credit in the ads
4:17it's going to be a boom keep in mind ads
4:20that new uh industry is going to create
4:22jobs as well
4:24the gap between the rich and the poor
4:26having more poor people in comparison to
4:28rich people
4:29too many poor americans that's going to
4:31create a dependency what are they going
4:33to be dependent on
4:34jobs so that is going to be an arrow
4:36down because if the economy collapses if
4:38that credit is removed
4:40that means that americans are going to
4:42do none of this spend saving and
4:43investing
4:44so too many poor americans that's going
4:46to put us probably somewhere here
4:49um and then depending on if americans
4:51are going to be able to buy business
4:52production or credit
4:54that might get the arrow going up but
4:56for the most part
4:57if americans have no money and uh they
5:00can't
5:01do any of the spending then that is
5:03going to impact business production and
5:04then that will probably force wages
5:06down keep in mind if the economy
5:08collapses all of these americans are
5:10going to lose their job
5:11and they're going to need something to
5:13satisfy their needs which is why in our
5:15class simulation we are
5:17doing the movements according to
5:18frederick taylor and we are making three
5:20and spending three and so that is
5:21designed to kind of mimic this
5:23issue right here this one's a little
5:24more complicated oversupply
5:26so this is looking at it from the
5:28business point of view having too much
5:29supply too many goods supply is up
5:32wages are down this is going to be a
5:35bust right here because this is looking
5:37at business pretty much what's going on
5:39here is business is going to have a
5:41surplus
5:42if business is right here at sea the
5:44peak point
5:45they need to sell all of those goods
5:47business production is already up
5:49there might not be a need to pay wages
5:51because if you cannot unload and sell
5:54all of these items there would be no
5:55reason to produce more
5:56so business having a surplus is going to
5:59have this arrow up
6:00but it's going to force wages down and
6:03then wages down will then impact
6:04spending and saving
6:06business will never unload the uh
6:08warehouses
6:09and then before you know it in the long
6:10term businesses will have to cut about
6:12production and then the cycle would be
6:15starting to all move downward so for
6:17this example here
6:19supply that puts us right here at about
6:22c
6:22so at that point if something doesn't
6:24happen it will remain
6:25at c and then we'll start to see a drop
6:27once business realizes they cannot
6:29unload their products
6:3080 of americans are not having any money
6:32in savings
6:33this is a bust right here so americans
6:37uh
6:37if they don't have any money in savings
6:39that means they are completely dependent
6:41on those jobs
6:42which means they have to work and if
6:45they're working and they're making free
6:46spending three on their needs that means
6:48they could never
6:50um you know put money in the bank and
6:52that's problematic
6:53so uh these americans will be completely
6:56dependent on
6:57jobs so we've already established that
6:59if people are
7:00working and they're not able to pay um
7:03money you know to put money in the bank
7:06that is definitely going to be
7:07problematic
7:08so i use the example from class you're
7:10making three by doing the movements
7:11you're spending three for your rent your
7:13food that leaves you with no money to
7:14put in the bank which means you are
7:16permanently dependent on your job to get
7:18this three dollar income just to survive
7:21so having too many uh poor americans um
7:25you know eighty percent uh without any
7:27savings that will probably put us
7:29somewhere here
7:30keep in mind that you are not going to
7:32be able to save you are never going to
7:34be able to invest
7:35and you probably won't be able to spend
7:37because everything is dependent on your
7:38wages and the wages are dependent on
7:40business production
7:41so notice here that there's really not
7:43one cause for the depression i'm trying
7:44to just give you an example of all
7:46what about this one let's jobs do
7:47business cutting back so in this
7:49scenario we go back to the issue of
7:51business having a surplus
7:53so now this is a long term this is when
7:55businesses realize they can't unload
7:56that surplus so here we have one two
7:58three four five six seven eight nine
8:01people working let's say if business
8:03can't sell that surplus
8:05then that says well let's say you know
8:07these individuals right here get fired
8:08one two three four
8:10that is a way for some people to stay
8:12employed
8:13uh and it's a way hopefully for business
8:14to save money but i don't necessarily
8:16know in the long term where that's going
8:18to
8:19impact the business cycle if they can
8:21never unload their surplus
8:23they're going to be an issue where
8:24they're going to have to keep cutting
8:25back cutting back
8:26so the more they start cutting back now
8:28we start moving down
8:29d that is going to force wages down
8:32which is going to impact spend saving
8:34investing
8:34so if nobody is doing this because they
8:36don't have wages the end result will be
8:38business is going to start to decrease
8:40which means maybe you know next month
8:43the remaining people get fired so
8:44there's like uh
8:46you know there's a lot of things here
8:47depending on on other variables here
8:50so in this scenario let's take this one
8:52right here
8:53you know you're making three you're
8:54spending three you got no money in the
8:56bank
8:56um business is starting to cut back
8:58production so fearful americans are
9:01going to start saving money
9:02like in their drawer so now think about
9:05a situation where maybe you had
9:06five dollars you know in your pocket and
9:09now you're thinking about wait a minute
9:10they started to cut back on production
9:13uh people are losing their job i'm going
9:15to hold on to my money this is going to
9:17be
9:18a bust so now this is right here
9:20starting at this section
9:22spend saving investing is going down
9:23which will impact business production
9:25business is never going to start
9:27producing which is going to impact wages
9:29force that one down as well
9:30so this is like starting here which
9:32forces this one down then forces this
9:34one down
9:34and i use the example here if you have a
9:36million dollars in the economy
9:37and 500 000 is being saved as americans
9:41are fearing economic collapse
9:42like they're putting their money in the
9:44drawer five dollars in a drawer
9:46now you have to think about how many
9:47americans are doing that as they're
9:48starting to
9:49panic and that's precisely what's going
9:51on here that
9:52this five hundred thousand dollars if
9:55americans start to spend
9:57that might put business in a position
9:58where they start to uh
10:00need to produce which then they start
10:02hiring and then wages will go up and
10:03then the cycle kind of
10:04you know continues so again this goes
10:08back to that
10:08issue with the surplus if business
10:10cannot unload what they have
10:13um you know americans putting money in
10:15in their
10:16drawer saving it they're never going to
10:18be able to sell the items that are here
10:20this one has requires your understanding
10:22of world war one so we know in world war
10:24one
10:25that americans were selling a lot of
10:27goods to the european nations well
10:291920s going into the 1930s you're
10:31starting to see some of the european
10:33nations provide on their own so that
10:35means they no longer
10:36need to purchase items from the united
10:39states
10:40and uh this is going to be a issue where
10:42american
10:43producers are going to pretty much lose
10:45a customer so you lose a customer
10:48uh and which means business production
10:50will go down a little impacting wages
10:51and then some americans are not going to
10:53be able to do this one here
10:55keep in mind we know that germany was
10:57asked to pay reparations
10:59and germany um you know in the 20s is
11:03really struggling economically
11:06this chart right here you know if they
11:08don't pick up on this
11:09um you know going into the uh
11:13late 20s you start to see some european
11:15nations really start to struggle
11:16up until the point in 1933 where the
11:19nazis come up with a new deal program
11:21that involves
11:22militarization but if we go back to
11:25um world war one let's see
11:28we know during world war one the united
11:29states lent money to the allied powers
11:32germany needs um to pay back reparations
11:36to the uh british and the french which
11:39is what this represents germany is
11:40paying
11:40reparations the allies are receiving
11:43money from germany
11:44and then they're taking the reparation
11:45money and they're paying back the loans
11:47that they borrowed during the war
11:49this seems like a perfect cycle however
11:52eventually when the united states starts
11:53to experience its economic crisis the
11:55u.s
11:56cuts off lending money to germany which
11:59then means
11:59uh germany can't pay the reparations
12:02which means american
12:03loans that were taken during world war
12:06one the
12:07allies cannot pay for those items so
12:09again there's a cycle here by the time
12:11you
12:12get into the 20s into that 30s
12:14transition some of those european powers
12:16are experiencing an economic crisis
12:18and of course as the german economy
12:20starts to go down support for the nazis
12:22and alternatives start to
12:24increase so you can look at the economic
12:26crisis in the united states
12:29the economic crisis in germany and
12:30reparations without uh
12:32you know having some understanding of
12:35you know how the nazis come to power i
12:36think i kind of reverse that i should
12:38set it the other way anyway let's move
12:39on eight million bank accounts are
12:40eliminated
12:42so in this scenario here this is a
12:45bust because 15 million bank accounts
12:47deposits
12:49so think about 15 million americans 15
12:51million americans having five dollars in
12:53each account
12:55that means 75 million dollars is
12:58available but
12:59in the bank so if the banks close down
13:02because the banks
13:03don't have access to this 75 million
13:05dollars and that's definitely something
13:07that happens during the
13:08depression um one of the causes there
13:11that is going to create a situation
13:12where
13:13americans are not going to be able to do
13:15any spending
13:16using the money that they deposited in
13:18the bank and that's what's going to
13:20force this to go down americans are not
13:22going to be able to spend save invest
13:23which means business never on those
13:25surplus americans go to the bank
13:28and that's what you see here a bunch of
13:30americans lining up to go to the bank
13:31and the issue here is you know let's
13:34just say like up until this point the
13:36bank
13:36actually runs out of money which means
13:38all of these people don't have access to
13:40their five dollars
13:41if they have access to their five
13:43dollars they probably would spend and if
13:45they spend that would impact business
13:47production and maybe this thing would
13:48kind of
13:49work itself out but that's not what
13:51happens removal of actual money from the
13:54economy so
13:55this is a problem um on a part of the
13:58federal government where they look at
14:00all of the decline of all these issues
14:02and then they think well what is going
14:04to
14:04resolve this and they decide to go to a
14:06deflationary period which means
14:08they are going to have less money in the
14:10economy and i'm going to go back to the
14:12example here
14:13let's just say there was a million
14:14dollars in the economy
14:16and now they've moved this down to 500
14:19000
14:20they went to a deflationary period that
14:23would be
14:23odd because now americans have less of
14:27an ability
14:27to spend save invest which is going to
14:29help business production
14:31one of the things in the new deal which
14:33is the solution to the economic crisis
14:35is to get americans
14:36money and we'll see how that plays out
14:38when we get to that section
14:39stock market crash so this is about the
14:41stock market crash
14:43this is going to be a bus american
14:46companies their value is going to start
14:48to
14:49you know decline and this is going to be
14:51a actual sign that
14:53the american economic system of
14:55capitalism is
14:56failing and that becomes the final sign
14:59um you might want to thank here you know
15:01what would be one of your one strategy
15:03if you were
15:03advising the president herbert hoover uh
15:06to uh
15:08you know resolve any of these particular
15:09issues what would be a good solution
15:11to reverse the economy because during
15:14hoover's administration
15:16there's going to be a lot of poverty
15:18going into the depression here you see a
15:20hooverville
15:21which was a term to mock the president
15:23these little shanty homes that were set
15:26up as people
15:27lost their homes they needed to move
15:29into these little
15:30shed like structures a hoover blanket
15:34the hoover blanket is the newspaper you
15:36know again it's a
15:38uh poking fun at the president for his
15:41uh
15:42responsibility for failing to rise to
15:45the
15:45solution to this economic crisis and a
15:47hoover flag
15:49but again i have no money way to mock
15:52the president
15:53so again you have to have some
15:54understanding of the model the business
15:55cycle so you want to make sure that you
15:56take a look at that
15:57going back to the data here hopefully
15:59you have better understanding
16:01and again you can't look at one cause
16:02for the depression you have to kind of
16:04look at how one impacts the other
16:06you know when americans don't have any
16:07money in savings that means they're
16:09going to be dependent on those jobs
16:11you know those jobs better always be
16:13there or the credit better always be
16:14there because that means that americans
16:16are never going to be able to spend
16:18and uh the economy is either supported
16:20by those jobs are supported by the
16:21credit
16:23and when you have a lot of people that
16:24are struggling financially the gap
16:26between the rich and the poor that means
16:28they're never going to be able to save
16:29which means again they're completely
16:31dependent on this system
16:32uh 70 are not earning what they need to
16:35survive that was the point in the
16:36simulation of giving you three dollars
16:38and making your expenses three dollars
16:39you're never going to be able to save
16:41you're never going to be able to get out
16:42of your economic crisis
16:44and that's it those are the causes for
16:45the depression

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