The Great Depression

Economic Collapse Industries in trouble Many key industries made little profit in the 1920s. Key economic indicator – number of new houses built declined.

Farmers need help Crop prices dropped by around 40% Farmers went into debt trying to payoff loans. Banks took farms for repayment of debts. Congress tried to help with federal price supports. The government would buy surplus crops at guaranteed prices and sell them. Coolidge vetoed.

Consumers Have Less Money to Spend Americans bought less – rising prices, stagnant wages In 20s people often bought goods on credit. Credit – buy now and pay later. Credit = growing debt. People started buying less.

Hoover Takes the Nation Election of 1928 Republican candidate: Herbert Hoover (winner) Democratic Candidate: Alfred E. Smith “We are nearer to the final triumph over poverty than ever before.”

Stock Market Dow Jones was high = many people bought stocks. Engaged in speculation and buying on a margin. Speculation – buying stocks hoping they will make money at risk Buying on a margin – pay 10% of stock price and promise to pay the rest later.

Stock Market Crashes Fall 1929, stock prices fall causing people to sell their stocks. October 29, 1929, Black Tuesday 16.4 million shares were sold, few were bought. People who bought stocks on credit (buying on a margin) were left with huge debts. Many people lost all their savings.

Financial Collapse The stock market crash began the Great Depression. Great Depression – 1929-1940, the economy plummeted and unemployment skyrocketed.

Economic production was nearly cut in half. Bank and Business Failures People panicked and took their money out of banks. Many banks failed. Some people were unable to get their money. By 1933, 11,000 out of 25,000 banks failed. Economic production was nearly cut in half. By 1933, the unemployment rate was 25%

1930, Hawley-Smoot Tariff – largest protective tariff in US history. Worldwide Effects 1930, Hawley-Smoot Tariff – largest protective tariff in US history. Purpose – to protect US farmers and manufacturers from foreign competition Effects –Unemployment increased. Worldwide trade decreased by 40%

Causes of the Great Depression Tariffs and war debt limited foreign demand for American goods. Farm crisis Easy credit Unequal distribution of income These factors caused consumer demand to decrease. The government kept interest rates low, encourage businesses and individuals to keep borrowing and building debt. Some of this borrowed money was used to buy stocks which led to the stock market crash.

Hardship and Suffering during the depression The Depression in the Cities Homelessness People built shacks out of any material they could find. Little towns of shacks, known as shantytowns, sprang up. People depended on soup kitchens and bread lines. African Americans and Latinos had higher unemployment rates and lower wages.

Loss of farms. Many farmers became tenant farmers and migrant workers. Depression in Rural Areas Loss of farms. Many farmers became tenant farmers and migrant workers. The Dust Bowl Drought, overproduction, and plowing ruined farm land. Early 1930s – strong winds blew away topsoil, exposing dust and sand in the Great Plains region. Known as the Dust Bowl. People left and moved west. Migrants became known as Okies.

Effects on the American Family Men – some became “hoboes,” traveling the country, riding on boxcars, and sleeping under bridges. There was no direct relief – cash payments or food provided by the gov’t. Women – were forced to enter the workforce but many places would not hire them. Children – health problems, school year shortened, child labor increased.

President Hoover Hoover did not believe in federal direct relief. Economists believed the economy would naturally improve on its own. Hoover did not believe in federal direct relief. Welfare could damage the “moral fiber” of the country. He believed industries and laborers should work together to solve the economic problems. Believed private charities should help the poor.

Boulder Dam (Hoover Dam) Began construction in 1929 Provides electricity, flood control, and a regular water supply to California and Nevada.

By 1930… Shantytowns became known as “Hoovervilles” Homeless people called the newspapers they wrapped themselves in “Hoover Blankets. Empty pockets turned inside out were “Hoover flags.”

Hoover’s Actions Federal Home Loan Bank Act – lowered mortgage rates and allowed farmers to refinance their loans. Reconstruction Finance Corporation (RFC) – provided emergency financing for banks, insurance, railroads, and other large industries. Relief would trickle down to the poor. Too little, too late.

Bonus Army WWI veterans and their families marched to Washington to support the Patman Bill. Built a large shantytown in sight of the capital. Patman Bill – would provide cash payment and life insurance to WWI veterans. Bill failed. Some of the Bonus Army refused to leave. Hoover sent the army, lead by Douglas MacArthur, to run them off. Troops gassed the Bonus Army and burned the shanties.