The Great Depression

Learning Outcomes: 1. Discuss the weaknesses of the economy in the 1920’s 2. Explain how the stock market crash contributed to the coming of the Great Depression 3. Describe how the Great Depression spread overseas

Key Terms and People Herbert Hoover speculation Black Tuesday business cycle Great Depression Hawley-Smoot Tariff

Prosperity Hides Troubles Consumption went up Gross national product went up Stock market went up Bull market

Optimism Sweeps Hoover to “W” Republican Ran against Alfred E. Smith—lost because he was Catholic

Problems Plague the Agricultural Sector Summary During the war there was a high demand of farming good throughout the country. Once the war was over demand for those good went down and sent the rural community spiraling into a depression. Farmers bought costly equipment to keep up w/ the demand of WWI. Took on huge debt Post WWI demand went down Rural depression, natural disasters Lived off credit from month-to-month

Wealth is Distributed Unevenly Wages and disposable income rose in the 20’s As wages rose gradually, worker productivity increased astronomically Rich became richer and workers became less poor—economic problems Income distribution chart p. 369

The Stock Market Crashes What was the basis for soaring stock prices during the 1920’s? What happened when investors lost confidence in the stock market? Too much money was being poured into stock speculation Black Thursday— nervous investors started to sell stocks Black Tuesday—16 million shares were sold

The Banks Collapse Summary After the stock market crashed people became fearful and tried to get their money from banks, but after some flawed policies put in by the gov’t the banks ran out of money. Frightened depositors feared for their money and tried to withdraw it from their banks Misguided monetary policy—cut interest rates to stimulate economic growth The “Fed” discouraged lending—too little money in circulation

Businesses Close & Unemployment Rises Collapse of stock prices and reduced consumer spending led to business failure Production cutbacks, maintain price levels, layoffs, and reduced payroll By 1933, 25% of Americans had lost their jobs

Tariffs Add to Woes The gov’t moved to protect American products from foreign competitors Hawley-Smoot Tariff European countries retaliated and passed tariffs of their own against U.S. goods Helped destroy international trade

The Depression Goes Global Copy diagram on top of p. 372 European problems of reparation payments, war debt payments, and international imbalance of trade had already created a shaky economic structure Germany ceased payments—GB/France suspended payments

Review Questions 1. Why did many farmers face economic difficulties during the 1920’s? 2. Why did the uneven distribution of wealth contribute to the economic troubles of the U.S? 3. What problem did the availability of easy credit create? 4. How were the stock market crash and the collapse of the banking system related? 5. How did these events affect the nation’s workers and businesses?

Learning Outcomes 1. Discuss how Hoover’s initial conservative response to the Great Depression failed. 2. Explain the changes in the President’s policies as the crisis continued. 3. Describe how Americans reacted to Hoover’s relief programs.

Key Terms and People Localism Reconstruction Finance Corporation trickle-down economics Hoover Dam Bonus Army Douglas MacArthur

Cautious Response to Depression Fails Summary President Hoover attempted to restore the nation’s economy by changing his “hands off” approach through volunteerism and gov’t policies to help kick start the economy and end the depression. Hoover asked business and industrial leaders to keep employment, wages, and prices at current levels. Called for gov’t to reduce taxes, lower interest rates, create public- works programs Requested the rich give to charities

Volunteerism Fails to Bring Relief Relied too much on voluntary cooperation Hoover was cautious to encourage…not legislate Volunteerism did NOT work Localism—no financial or human resources to successfully work The crisis demanded decisive federal action

Hoover Adopts More Activist Policies The association of the President’s name w/ suffering and want indicated Americans’ feelings for him Reconstruction Finance Corporation (RFC) Trickle-down economics Did NOT work! Hoover Dam Project— brought much-needed employment to the SW

Some Urge Radical Change Some Americans thought the answer was to reject capitalism and accept socialism/communis m These ideas were rejected Americans never lost faith in their country

Bonus Army Marches on Washington Bonus Army—war vets seeking bonus Congress had promised them from WWI Adjusted Compensation Act—provided lump- sum payment to vets Vets wanted early payment, but Hoover vetoed bill

Hoover Orders the Army Out General Douglas MacArthur, Dwight Eisenhower, and George Patton Marchers were tear- gassed and many were badly injured In 1932, Americans were ready for a change in the Oval Office.