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THE GREAT DEPRESSION CH 22

THE GREAT DEPRESSION Why It Matters Prosperity in the U.S. seemed limitless before the Great Depression struck. Overproduction & agricultural problems contributed to the economic catastrophe. President Hoover looked to voluntary business action & limited government relief as solutions, but these efforts failed. Meanwhile, millions of Americans lost their jobs & life savings. Artists & writers depicted this suffering, & many people turned to lighthearted films to escape their difficult lives. The effects of the Gr. Dep. were felt across the world. Not only did it lead to the New Deal in America, but more significantly, it was a direct cause of the rise of extremism in Germany leading to World War II.

CAUSES OF THE GR. DEPRESSION 1. Stock Market Crash of 1929: Leading up to the stock market crash of 1929, there had a been a long bull market, or market where stocks are on the rise. In October 1929, the stock marketed plummeted & overconfident & heavily invested stockholders lost tens of billions of dollars. 2. Overproduction: Am. businesses earned record profits after WWI & during the 1920s; Am. businesses then reinvested much of these profits into expanding their business. The problem was, that at that time, the tariff was raised to 60%: what this meant was that trade with other countries decreased. LESS TRADE = NO ONE TO SELL AMERICAN PRODUCTS TO = SURPLUS/OVERPRODUCTION. With so many business now unable to rely on international trade, they were not able to pay back many of the loans they had borrowed from banks for production costs. 3.Bank Failures: Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and, thus, as banks failed, people lost their savings. Surviving banks, unsure of the eco. situation & concerned for their own survival, stopped being as willing to give out new loans. 4. Reduction in Purchasing Across the Board: With the stock market crash & widespread bank failure, people stopped purchasing items. This then led to a reduction in the # of items produced & thus a reduction in the workforce. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation. 5. Drought Conditions: While not a direct cause of the Gr. Dep., the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many farmer could not even pay their taxes or other debts and had to sell their farms for no profit. The dried up region of the Mississippi Valley was nicknamed "The Dust Bowl."

Hoover’s Response to the Gr. Depression HOOVER’S IDEOLOGY Hoover was a strong laissez-faire advocate; he believed in a balanced budget and not pumping government money into the economy, which he thought would lead to inflation. He believed in "rugged individualism," which relies on the individual, the churches and private charities, and the local and state governments to handle most of the economic help that was needed. While not believing in government assistance, Hoover did try and give much of his personal money to charity and encouraged Americans to do the same. HOOVER’S RESPONSE TO THE DEPRESSION During Hoover’s Administration (despite Hoover’s personally beliefs about government intervention in the economy) the government spent $1.5 billion a year on public works and relief in the following ways: (1) road, public-building, and airport- construction projects, (2) increasing the country`s credit facilities, strengthening the banking system. (3) direct relief, $300 million, to the states for relief. Congress during the Hoover presidency, most significantly, established the Reconstruction Finance Corporation, or RFC, which created an agency to help banks, railroads, and other key businesses to stay in business thus helping the economy. All of these things, however, could not stem the tide of the economic collapse.

Hoovervilles and the Bonus Army In appreciation of WWI veterans, the US government promised returning veterans a $1000 bonus to be given to them in the year 1945. By 1931, though, many veterans were feeling the effects of the depression and demanded their $1000 bonus be given to them immediately and not have to wait until 1945. Thousands of veterans, known as the “bonus army” or “bonus marchers,” marched to Washington DC, where they camped in Hoovervilles (a term generally used for the slums, or shantytowns [shacks] for which Hoover was blamed for during the Great Depression). President Hoover ordered troops to break up the Hooverville; gunshots and fires went off, two veterans were killed in the chaos. The scene received nationwide press coverage and showed newsreel images of veterans being assaulted by the president’s troops. This event made the already unpopular President look like a villain. Public opinion of Hoover dropped significantly.