The Great Depression Begins Chapter 15: The Great Depression Begins

The Stock Market Crash By 1929, the rising U.S. stock market dominated the news in America. By September 3, the Dow Jones Industrial Average, an average of the stock prices of major industries, had reached an all-time high. Prices peak in September, began slowly falling, and some brokers called in the loans of those who had bought on the margin. This began a panic as worried stockholders began to sell.  

Tuesday October 29, 1929 Panic climaxed 16.4 million shares were sold. Black Tuesday, saw a complete collapse of the stock market—now known as the Great Crash. By the end of the day, investors had lost over $30 billion. Although the effects of the Great Crash were initially felt by the actual investors (some of whom lost everything), the effects soon rippled throughout the whole economy.

Banks Fail Banks depend on their investments—specifically, the interest they make on loans—to survive. When investors cannot repay the bank, the bank cannot survive. As banks closed, there came another panic as customers went to withdraw their money and banks did not have the money to give them. Bank failures caused Americans to lose their life savings

Bank Panic

Production of Goods Slows Secondly, because businesses could no longer borrow money to produce more goods, and few people had the money to buy them anyway, the production of goods slowed So b/c not producing goods, they couldn’t pay salaries, millions of people lost their jobs. Because fewer people had money, fewer goods were produced, resulting in even more job loss.

Effects of the Great Crash, 1929 Investors Businesses and Workers Investors lose millions. Businesses lose profits. Consumer spending drops. Workers are laid off. Businesses cut investment and production Some fail. Banks Businesses and workers cannot repay bank loans. Savings accounts are wiped out. Bank runs occur. Banks run out of money and fail. World Payments Overall U.S. production plummets. U.S. investors have little or no money to invest. U.S. investments in Germany decline. German war payments to Allies fall off. Europeans cannot afford American goods. Allies cannot pay debts to United States. Great Crash Investors Businesses and Workers Investors lose millions. Businesses lose profits. Consumer spending drops. Workers are laid off. Businesses cut investment and production Some fail. Banks Businesses and workers cannot repay bank loans. Savings accounts are wiped out. Bank runs occur. Banks run out of money and fail. World Payments Overall U.S. production plummets. U.S. investors have little or no money to invest. U.S. investments in Germany decline. German war payments to Allies fall off. Europeans cannot afford American goods. Allies cannot pay debts to United States. Great Crash Investors Businesses and Workers Investors lose millions. Businesses lose profits. Consumer spending drops. Workers are laid off. Businesses cut investment and production Some fail. Great Crash Investors Investors lose millions. Businesses lose profits. Great Crash Investors Businesses and Workers Investors lose millions. Businesses lose profits. Consumer spending drops. Workers are laid off. Businesses cut investment and production. Some fail. Banks Businesses and workers cannot repay bank loans. Savings accounts are wiped out. Bank runs occur. Banks run out of money and fail. World Payments Overall U.S. production plummets. U.S. investors have little or no money to invest. U.S. investments in Germany decline. German war payments to Allies fall off. Europeans cannot afford American goods. Allies cannot pay debts to United States.

World Wide Because the international economy was dependent on the United States for loans, Investments and a market place the ripple effect of the Great Crash led to a worldwide economic depression.

Causes of Great Depression Unstable economy where nearly all the wealth was held in a few families and not spread among farmers and workers. Over speculation in the stock market and investors borrowing heavily to cover their purchases. Government regulation cut interest rates to encourage speculation and then limited the supply of money to discourage lending. Once the problems with the market were obvious, there was too little money in the economy to recover from the crash.

Social Effects of the Depression People at all levels of society found themselves in trouble during the depression as they lost their savings in bank failures, their jobs in company closures, and their homes because they could no longer pay rent or mortgages. Many of the homeless built shantytowns out of tar paper shacks or other scrap material. They called these makeshift towns “Hoovervilles” after President Hoover, who was blamed for not alleviating the crisis.

Farmers Had not seen prosperity during the 1920s and were already losing their farms, was made even worse by an environmental crisis. Years of drought and the disappearance of natural prairie grasses led to dust storms that blew away good topsoil. A large area of the Great Plains became known as the Dust Bowl. 60% of farming families left their land and hundreds of thousands to leave the area and migrate either to California or northern cities.

Dust Storm

Black Blizzard

Physical and Psychological Toll Many people suffered from an inadequate diet and lack of shelter. Some died because they could not afford food and medical treatment. Men suffered because they could not support their families. Many were ashamed for being out of work, and some even abandoned their families. The hard times increased discrimination against African Americans and other minorities.

Surviving the Great Depression Americans survived the Great Depression by sticking together. This can be seen very clearly in the penny auctions of the farmers. When a farmer was to lose his land to the bank for failure to pay his mortgage, other farmers would conspire to give the land back to its owner. They would bid mere pennies on the land and the machines auctioned by the bank and then give the land and machines back to the owner. The success of these auctions led some states to pass laws to give farmers more time to pay off debts.

Other Americans survived the depression by leaving home and riding the rails— stealing rides on trains and wandering the country looking for work and a place to start over. This solution was particularly favored by adolescents. By the mid-1930s, over 250,000 teenagers were living on the road.

Signs of Change Prohibition was repealed as a failed experiment. Jacob Raskob began the building of the Empire State Building, giving people in New York an opportunity to work. The nation’s distressed condition was symbolized by the tragic kidnapping and murder of the infant son of Charles and Ann Morrow Lindbergh.

As the memory of the 1920s faded away, the nation’s distressed condition was symbolized by the tragic kidnapping and murder of the infant son of Charles and Ann Morrow Lindbergh.

The Election of 1932 After the stock market crash, President Hoover insisted that the economy would recover if everyone had enough confidence. It didn’t. Hoover also refused to provide relief for the millions of unemployed and homeless, insisting that this was the job of private charities, not the government. He eventually did take measures to help suffering Americans, but they were too little.

Hoover’s Attempt To Help To protect domestic industries, he supported the Hawley-Smoot Tariff. In 1932, he set up the Reconstruction Finance Cooperation, which gave government credit to large industries, railroads, insurance companies, and banks. Congress passed the Home Loan Bank Act to help owners save their homes. The government also began to create jobs by building the Hoover Dam.

Despite these measures, Hoover’s unpopularity continued to grow Despite these measures, Hoover’s unpopularity continued to grow. People saw him as cold and uncaring. In 1932, World War I veterans called the Bonus Army marched on Washington to get early payment of a pension bonus that had been promised them. Hoover refused and told them to leave. When they did not leave, he asked General Douglas MacArthur to make them leave. MacArthur decided to use force and drove the marchers, former members of the American armed forces, out of Washington with guns. The country was horrified, as was Hoover himself, and Hoover’s popularity plummeted even more.

The Democratic candidate for president in 1932 was Franklin Delano Roosevelt (FDR), a distant relative of Theodore Roosevelt. Like his relative, FDR had served as the assistant secretary of the Navy and as governor of New York. While running for president, FDR promised a “New Deal” for all Americans. Roosevelt was ready to experiment with government roles to provide relief.

FDR’s wife, Eleanor, was an experienced social reformer FDR’s wife, Eleanor, was an experienced social reformer. She worked for public housing legislation, state government reform, birth control, and better conditions for working women. When the Roosevelts campaigned for the presidency, they brought their ideas for political action with them.

As governor of New York, he had worked boldly for relief, making New York the first state to provide monetary assistance for unemployment and to aid the poor during the Great Depression. Roosevelt won in a landslide victory, and as he stepped into office, he would bring sweeping change to the role of the federal government in people’s lives and to the presidency itself. 

The Election of 1932 Franklin Roosevelt Herbert Hoover Believed that government had a responsibility to help people in need. Called for a reappraisal of values and more controls on big business. Helped many Americans reassess the importance of “making it on their own” without any help. Much of his support came from urban workers, coal miners, and immigrants in need of federal relief. Roosevelt won 57 percent of the popular vote and almost 89 percent of the electoral vote. Believed that federal government should not try to fix people’s problems. Argued that federal aid and government policies to help the poor would alter the foundation of our national life. He argued for voluntary aid to help the poor and argued against giving the national government more power. Hoover gave very few campaign speeches and was jeered by crowds.