Hoover and the Depression The Crash of 1929 Hoover and the Depression

Hoover’s background Self-made man - a millionaire businessman WW I food administrator Chairman of American Relief Org. Member of Harding’s cabinet Held no elective office until Presidency Hoover was orphaned at a young age. He put himself through Stanford U. and made a fortune as a mining engineer in China and Australia. During WWI, he served with distinction as Wilson’s Food Administrator, an accomplishment that landed him a job as Secretary of Commerce under Harding and Coolidge Hoover was by no means ignorant of the plight of the poor and homeless. Following WWI, he was appointed Chairman of the American Relief Organization, an agency that sought economic restoration in Europe. When the agency was disbanded, he went on to form the European Children’s Fund to care for millions of orphaned children in Central and Eastern Europe. When he became the Republican nominee for president in 1928, Hoover had never held an elective office.

Hoover on prosperity in 1928 “We live in a day when poverty will be banished from this nation.” Campaign speech, 1928 “Capitalism has matured. We will never have another depression.” Hoover, 1928 “A chicken in every pot & two cars in every garage” Republican slogan, 1928 Campaign

Hoover’s Bull Market of 1929 During 1st 6 mos. of Hoover admin. Height of stock prices Aug. 1929, 300 billion shares bought on margin “Get rich quick” gamble Money normally earned off dividends Margin buyers looking to buy low then sell high Only works if stock price goes up! Hoover’s Bull Market of 1929

The 1929 Stock Market Crash

The Causes Over-production in industry Uneven distribution of wealth Output > consumer purchases Uneven distribution of wealth Trickle-Down theory failed Mechanization in industry cut jobs Farm income  = supply > demand Unsound banking practices Default Closures  Lost Savings

The Causes Over-speculation in real estate / margin buying in stock market Prices driven to unrealistic levels Foreign Economic troubles Poor Euro economies  reduced purchases of U.S. goods U.S. tariffs reduce sale of Euro goods  default on loans

The Causes International Debt Structure Euros owed $ to U.S. banks Reparations supposed to help U.S. refused to forgive debts U.S. banks loaned $ to Euros Created more debt Tariffs made earning $ harder Euros defaulted on loans

Black Tuesday - The Crash Fear of falling stock prices feeds a major sell-off Oct. 24, 1929 - Black Thursday 13 million shares traded bottom falls out of the market Oct. 29, 1929 - Black Tuesday 16 million shares - market dies $30 billion in stock gone by 11/14

Consequences of the Crash Within 1 year - 1,300 banks failed 5,000 more within 3 years 9 million savings accounts vanish 85K businesses & factories closed Unemployment (25%!) Mortgage foreclosures 400K farms lost Collapse of foreign markets