From Prosperity to Despair 1928-1932

A. Election of 1928 1. Coolidge’s surprise- “I do not choose to run for President in 1928”

2. Republicans choose H. Hoover 3. Democrats choose Al Smith *Qualifications – Big city Catholic, son of immigrants, Gov of NY… 2. Republicans choose H. Hoover *Qualifications – small town protestant, self made millionaire, Sec of Commerce under Pres Coolidge, WWI Relief Agency… *Catholic issue – used by Republicans against him…

4. Hoover wins big, reflecting belief that things were fine

B. Get Rich Quick Fever * “Rags to riches” stories inspired speculation in the stock market and in real estate

1. Land (real estate speculation) - nation wide, but a particular boom occurred in Florida *People sometimes (unknowingly) bought swampland sight-unseen. A big hurricane in 1926 ends the land boom (temporarily…)

2. Stocks * Only about 1.5 million people were involved in buying stocks, but the market and its 1929 crash had a big influence on the depression that follows *Unrealistic stock prices in 1928 and 1929 and too much buying “on margin” helped lead to Oct. 1929 crash *Buying “on margin” means paying only a portion of the stock’s total purchase price and borrowing the rest – from a stock broker or from a bank (a high reward, but high risk, way to invest…

C. Signs of a Slow Down 1. Wages weren’t keeping up with the prices so: * Buying and spending goes down * Demand goes down * Eventually workers are laid off * Production cut backs begin * This becomes an endless cycle

D. The Crash 1. Stocks: * Prices rise steadily during the 1920’s Prices skyrocket in 1928-29 despite signs of economic slowdown * By Sept. 1929 prices were 400% higher than 5 years earlier and were now falsely representative of many companies’ worth

*Oct. 24th- “Black Thursday”- NYSE flooded with orders to sell and with margin calls * Oct. 29th- “Terrible Tuesday” (also called Black Tuesday) - orders to sell at any price, but fewer takers as market “crashes”

E. Causes of the Depression 1. Too much supply - not enough demand * Mass production vs. wages not keeping up…

2. Too many “durable goods” Examples: refrigerators, stoves, autos, etc. * By 1929 many either already had them or couldn’t afford them

3. Business inventories (goods on hand) too high * Causes production cuts/ lay offs/ less purchasing power…

4. Weakness of banking system People, not trusting them, withdrew their money From banks * Banks loaned to speculators who now couldn’t pay back loans * “Bank Runs” - people withdrew money from the banks in a mass panic * Approx. 5,000 banks fail from 1929-1932 (**140 failed in “Great Recession” of 2009…)

5. European investors had their own economic problems so they withdrew money also

F. Economic Collapse and its Impact

G. Hoover’s Initial Hands Off Policy 1. Believed the depression was part of the normal economic cycle - as was recovery 2. Tried to bolster confidence – made a public statement that “The depression is over” May 1930

3. Urged voluntary relief programs - examples: Salvation Army, YMCA, Community Chest, etc. ~ Also encouraged business leaders to stop production cutbacks and layoffs

H. Hoover’s Efforts 1. Spent government money on public works projects - but only with money on hand… 2. Reconstruction Finance Corp. (RFC) * Government agency designed to stop bank/business closures (similar to recent “bail outs”) *Ineffective because: 1. Banks slow to loan out money 2. Few Public Works projects were funded **This program was based on the “Trickle Down” theory of Economics but the way it operated little help “trickled down”!

I. Bonus Army The B.E.F. or Bonus Expeditionary Force In 1931, Congress votes to let Vets borrow against a promised bonus (for serving During WW1) 2. Hoover vetoes the bill

3. Vets march from Oregon (and elsewhere across the country) to Washington D.C. *Hoover refuses to meet with them

4. Many set up camp near the Potomac River on the “Anacostia Flats”

5. After a violent scrap with local police, General Douglas MacArthur ordered to use the Regular Army to break up the B.E.F.’s camp 6. Negative publicity hurts Hoover

J. Election of 1932 1. Republicans re-nominate Hoover despite his growing unpopularity

2. Dems nominate Gov. of New York Franklin Delano Roosevelt 3. Campaign - Hoover seemed pessimistic, while FDR exuded optimism and pledged a “New Deal” for the American people

4. FDR defeats Hoover in a huge landslide