The Great Depression Begins Chapter 18 The Causes of the Great Depression (1)

The Causes of the Great Depression The 1920s were prosperous but speculation in the stock market , risky lending policies, overproduction, and uneven income distribution undermined the economy and led to the Great Depression. Hoover took the office of President in a landslide victory and proclaimed that America had a “future that was bright with hope.” In slightly more than 6 months the United States would enter a financial crisis unlike anything we had ever seen.

The Causes of the Great Depression The optimism that was the fuel of the 1920s also drove the stock market to new highs. The stock market was experiencing a long period of rising stock prices known as a Bull Market. Because of plentiful money in the cities many inexperienced investors owned stock (over 10%)

The Causes of the Great Depression Before the 1920s stock prices (the value of a company divided into small parts or shares) generally reflected the stock’s true value. Amateur investors were investing in stocks betting that the market would continue to grow and they could make a profit- Speculators The trouble was that they were driving the stock prices up well beyond the true value of the companies.

The Causes of the Great Depression They thought the price would continue to climb and would buy stock on Margin- this method involves using mostly borrowed money to buy stock. When the experienced investors noticed that the prices were beyond the stocks true value they quickly began selling their shares. This led to others following suit because they were afraid if the price went too low they could not pay back their margin loans.

The Causes of the Great Depression As more and more people began selling their stock in late 1929 , the prices quickly declined. This continued to the point that many stocks lost most or all of their value and people lost all of their money. Over 30 billion dollars was lost in the Stock Market and people went from being well off to poor overnight. These events led to the Stock Market Crash of 1929 and would be followed by other events that would drive us into the Great Depression.

The Causes of the Great Depression The stock market crash severely weakened the banks which had taken their customers deposits and had invested a large amount in stocks. The banks would then not have the money to repay their customers who rushed the banks wanting their money back. This forced many banks to close and for people to have lost all their money they placed into the banks . MANY PEOPLE IN AMERICA WERE SUDDENLY BROKE. The stock market crash becomes a depression in America…The Great Depression.

The Causes of the Great Depression What the government could have done to stop the stock market crash would have been to increase the interest rates for borrowing money when they first saw the problem. Higher interest rates would have kept down the amount of buying on margin and might have prevented the crash. The Federal Reserve, however, kept the interest rates low, made money easy to borrow, and helped to weaken the Stock Market in 1929.

The Causes of the Great Depression Overproduction of goods also heavily contributed to the Great Depression. The mass production of goods greatly outpaced the rate at which the goods were bought. This undercomsumption led companies to layoff employees and cut the amount of goods sold even greater while driving up unemployment. The Hawley-Smoot tariff further complicated things by lessening commerce on both sides of the Atlantic. By 1930 over 26,000 businesses had collapse and left a large part of America without an income.

The Great Depression Begins Chapter 18 Life During the Depression (2)

Life During the Depression Many people in large cities stood in long soup lines for free food supplied to them by charities to assure they had a meal. The homeless, without anywhere to go would put up homemade shacks on public lands in communities referred to as shantytowns. These shantytowns were also referred to as Hoovervilles after the President whom many blamed for their predicament. Those who could not pay and would not move on or out of their homes were thrown out by court officers known as bailiffs. Many of them ended up in the Hoovervilles others rode the rails as hobos looking for employment

Life During the Depression The Depression grew worst during the Hoover administration. In 1930 over 1300 banks had closed their doors and by 1933 that number rose to over 9,000. In 1932 over 30,000 companies went out of business and by 1933 over 12 million people in the United States had no job. People were desperate, without hope and many were hungry and not knowing where their next meal might come from.

Life During the Depression The people in the cities were not the only ones suffering during the Great Depression. Most farmers had suffered through drought and pestilence during the 1920’s and were accustomed to the austere lifestyle. The Drought caused the farmers to lose their crops in the Great Plains. In the Great Plains area, drought and uncultivated land led to the Dust Bowl conditions with the wind blowing massive storms of dust hundreds of miles. Some managed to hold on to their land but most lost it and moved on in search of work

Life During the Depression The hard times of the era led many to seek forms of entertainment that allowed them to escape from the their harsh realities. Movies, radio and even comic books grew in popularity. Comedies became popular be cause they provided people with such a release from daily worries. Walt Disney brought Mickey mouse to life and created the first full length animated movie with Snow White and the Seven Dwarfs in 1937. Radio provided shows about middle-class families and their illnesses, conflicts, and daily lives that were sponsored by laundry detergents so became known as soap operas. One of the originals was the Guiding Light

The Great Depression Begins Chapter 18 Hoover Responds to the Depression (3)

Hoover Responds to the Depression (3) Hoover tried to help with loans to banks and industries and by starting public works projects. Later he reluctantly supported direct aid to impoverished families. By the 1930’s more and more people were demanding governmental intervention and help. He increased the amount of public works projects to help replace some of the lost jobs. He refused to put a large amount of governmental money into this however so few were helped. He knew the only way to pay for public work projects was to raise taxes which the economy could not afford or to borrow money which he refused to do. Hoover also opposed direct federal relief to the unemployed because he thought that was the role of the state and city governments.

Hoover Responds to the Depression (3) In 1932 over 1,000 War veterans from WWI marched on Washington D.C. over promised bonuses. They became known as the Bonus Army They were lobbying Congress to pass legislation giving veterans their promised bonuses early. They camped out in Hoovervilles until their number swelled to over 15,000. The President would not talk with them and the Congress voted down their early bonus bill. Many then camped out in vacant D.C. buildings. Hoover sent in Douglas MacArthur who cleared them out of the buildings, burned many of the Hooverville shacks, pursued them out of the area with tear gas and force. This further tarnished Hoover’s reputation and chance for reelection when printed in the papers.

Timeline Hoover’s book, American Individualism is written The stock market crashes Hoover’s book, American Individualism is written Hoover sets up the National Credit Corporation(NCC) The Superman comic is first printed By this year over 4000 banks had failed. Calvin Coolidge decides not to run for reelection “Hunger Marches” organized by the American Communist Party march on Washington D.C. chanting “feed the hungry, tax the rich.” The dust storms of the Great Plains dump piles of dirt in Chicago Snow White and the Seven Dwarfs is produced by Disney. The Grapes of Wrath is written The magazine Life is started. Margret Bourke-White is born

Hoover Responds to the Depression (3) http://www.youtube.com/watch?v=xX7JlTpMf1E (daily Life) The End http://www.youtube.com/watch?v=nyAZGqFtVjw (Stock Market)