Great Depression

Causes of the Great Depression Stock Market Crash- Black Tuesday- October 29, 1929 – Stock prices had fallen the Thursday before – The wealthy bought a lot to stabilize – Stock prices continued to fall

Causes of the Great Depression Uneven income distribution- wages had not risen that much Speculation- people bought stock believing the price would go up and they could sell for a quick profit – “Buying on margin”- people borrowed money to buy stock making low down payments; when market crashed, people lost everything

Causes of the Great Depression Excessive use of credit- also called installment buying; 1920s advertising stimulated consumers’ desire to buy goods Overproduction- businesses produced too much and workers did not have high enough wages to buy them Weak farm economy- prosperity never reached farmers due to overproduction, high debt, low prices, and drought

Causes of Great Depression Government policies- laissez-faire policies did little to regulate these problems; high tariffs hurt farmers and international trade Global economic problems- Europe never recovered from WWI; most nations were interdependent in banking and trade

Effects Worst in 1932 GNP dropped from $104 billion to $56 billion in 4 years Income declined over 50% 20% of banks closed $10 million in savings 25% unemployment

Hoover Thought prosperity would return Did not ask for Congress’ help until summer of 1930 Thought government assistance to individuals would destroy self-reliance Thought relief efforts should be state level

Hoover’s Foreign Response Hawley-Smoot Tariff- increased tariff to satisfy business owners who thought higher tariffs would protect their businesses – European countries enacted higher tariffs in responses Suspended Dawes Plan- plan for US to collect war debts; Hoover suspended this plan; many bankers withdrew their money

Hoover’s Domestic Response Federal Farm Board- created in 1929 but powers were expanded; government held surplus grain and cotton in storage; did not stop surplus Reconstruction Finance Corporation- gave out emergency loans to help businesses; thought loans would “trickle down” to help lower classes Home Loan Bank Act- gave federal loans to homeowners to prevent foreclosures

Despair and Protest Farmers got together to stop banks from foreclosing on farms and evicting them from their homes – Farm Holiday Association- stopped entire crop of grain to keep it from reaching market Bonus March- thousands of unemployed WWI vets to demand bonus payments they were promised at a later date (1945) – Bill failed to pass – 2 veterans killed – Hoover ordered army to break up march/camp – Many thought Hoover was uncaring

Election of 1932 FDR nominated for Democrats – Promised a “new deal” FDR wins in a landslide Hoover became a “lame duck” – 20 th amendment shortened period between election and inauguration