Outward appearance of economic prosperity masking issues with economy Led people to buy on credit, companies to hire more people, and in turn offer more benefits to more people on money they did not really have Stock Market growth was at all time high – people thought they would never lose money – they bought stocks on margin (borrowing money) Booming economy led to less and less regulation on business Distribution of wealth was an issue Wealthiest Americans saw massive growth in wealth Working class saw little to no growth in wealth Buying on Credit became a major problem With prosperity came greed, greed led to boom in sales on credit, as everyone needed the nicest and latest items By end of 1920s people had reached credit limit – unable to pay back Federal Reserve made it harder to get loans – also became more costly When they could not pay back debts, people lost everything

September 1929 – Roger Babson (economist) predicted the fall of the stock market Crash would be made worse because of buying on margin and credit – people would lose everything He was not taken seriously Black Tuesday – October 29, 1929 – Stock Market finally collapses amid growing fears of economic ruin – investors sell off huge quantities of stocks to make money before the fall Large sell off of stocks leads to collapse of market

Individuals: Fortunes disappeared Huge debts occurred for those who bought on margin People stopped spending Banks: Rush to withdraw money out of banks by American citizens Banks which had invested in the stock market had no money to give customers when they came to withdraw savings – Created panic Loans failed – banks could no longer make money off of loans Banks closed Business: Already struggling businesses were made to suffer more People quit buying goods – cut in production, increase in layoffs Wage drops for workers caused more issues with angry employees Overseas – caused economies in Europe to collapse as many received aid from the United States High tariffs on imports to United States shut down global businesses

Great Depression – the most severe economic downturn in the history of the United States How did this happen? Bank failures because of lack of deposit insurance Led to Bank runs and failure of many banks – they shut down Farm failures stemmed from the fact that no one had money to buy food, this led to continued drop in crop prices Led to Foreclosures on farms – banks took over ownership of farms that could not be paid for Unemployment sky-rocketted for long periods of time The Depression lasted so long that it made things that much worse

High Poverty rate nationally Breadlines, begging, soup kitchens all formed so people get help Hoovervilles established – areas outside of towns where homeless formed shanty towns of tents, lean-tos, cabins. Called Hoovervilles as reference to people’s hatred of President Hoover People started moving around country to find work Gave rise to Hoboes Hoboes – people (usually men) who left families to go find work by jumping on trains and riding rails – very dangerous. Emotional toll of Depression People were embarrassed by having to take handouts and ask for help Caused a feeling of failure – led to sharp increase in suicide Anger and rage filled the nation

Name given to disaster of 1931 where extreme drought and dramatic windstorms led to a farming disaster in the Great Plains Effects: Farmers could not recover financially – led to loss of everything 2.5 million people leave the Great Plains and go west to California Used route that would become Highway 66 – famous car route to California of the 1950s and 1960s Led to rise of Woody Guthrie – country music singer who performed about hardship of Depression life.

Philosophy “Rugged Individualism” – people should be strengthened by their own responsibility and their own abilities to get through things Decreased government regulation on business Established idea of associative state – partnerships between government and businesses to help improve public life Led to construction of Hoover Dam Response to Great Depression Initially wanted no direct aid to go to people – help people help themselves Set up Cooperatives – collective group ownership of farmland to help farmers get through the worst of the agricultural crisis Wanted to work on finding ways to get business to cooperate with workers to help economy – no layoffs or stopping production Direct Action was needed Established the Reconstruction Finance Corporation (1932) – RFC – gave loans to banks, insurance companies and other businesses to help them financially – nothing to people Federal Home Loan Bank set up – made it easier to build houses and try to stop forclosures

Smoot-Hawley Tariff Act (1930) – raised taxes on imports from foreign countries so that U.S. citizens would buy American products Led European nations to do the same to America – stopped global trade Did more damage to American business and industry National Response to Hoover Him giving false hope to country about depression led to lack of trust in Hoover by American people He was looked at as having no compassion – did not help people directly Bonus March Incident – several images were taken of American soldiers in Washington D.C. fighting with World War I vets trying to get the money they were owed as part of government aid – images made Hoover look like a cold non-caring person. Hoover raised taxes on people to get money needed to pay these vets off and this raising of taxes caused more issues – country hated him