The Beginnings of the Great Depression Chapter 17

Did you know? The Great Depression was a global event. Throughout the world, many businesses and banks closed. Unemployment rates throughout the world soared.

I. The Election of 1928 The Candidates Republicans nominated Herbert Hoover, former head of the Food Administration during WWI. He was a Quaker, and promised a continuation of the 1920’s prosperity Democrats nominated Alfred E. Smith, the 4-time governor or New York and the first Roman Catholic nominated for president Religion, Prohibition, and the economy became major issues. Hoover won.

II. The Long Bull Market The stock market is a system for buying/selling shares in a company. The prosperity of the 1920s caused many to invest heavily in stocks As prices went higher, many bought on margin (making a small down-payment; pay the rest later) When the prices fell, lenders issued margin calls, demanding immediate repayment.

III. The Great Crash By late 1929, a lack of new investors caused stock prices to drop; margin calls caused many to sell their stocks, leading to Black Tuesday – Oct. 29, 1929. The stock market lost between $10 & $15 billion that day It DID NOT cause the Great Depression directly, but it did undermine the economy’s ability to recover.

III. The Great Crash continued The crash weakened the nation’s banks, causing many to close. Government did not yet insure bank deposits, so if a bank closed, anyone with money in that bank lost their savings Resulted in Bank Runs

IV. The Roots of the Great Depression Efficient machinery led to overproduction, & Americans could not buy all of the new stuff. Uneven distribution of wealth; The top 5% of the population held 30% of the nation’s wealth – that’s a lot! Over 2/3 of the nation’s families earned less than $2,500 per year.

IV. Roots continued Low consumption – workers wages did not increase enough to keep up with the quick production of goods. As sales decreased, workers were laid off. Chain reaction. Many Americans bought on the installment plan (paying off debts in small increments. Hawley-Smoot Tariffs raised tax on imports, so foreign nations raised tariffs on us. Hurt the economy. Instead of raising interest rates, Federal Reserve lowered them, so people continued to practice speculation.

V. The Depression Worsens By 1933, thousands were out of work. The unemployed relied on soup kitchens and bread lines set up by charities Many were evicted or forclosed on for non-payment Those who lost their homes lived in shantytowns called “Hoovervilles,” showing who they blamed for the nation’s troubles.

V. The Depression Worsens continued Many hobos (homeless Americans who wandered looking or a better life) traveled on Railroads seeking opportunity. As crop prices dropped in the ’20s, Many farmers left their fields fallow – the Drought of 1932 led to the “Dust Bowl.” Those who lost their farms often traveled to California as migrant labor.

VI. The Dust Bowl The most famous work of literature of the time was “The Grapes of Wrath” by John Steinbeck. It described a family, the Joads, who lost their farm and traveled to California. It wasn’t any better there.

VI. Promoting Recovery In an effort to promote economic recovery, Hoover received a pledge from industry to keep factories open and stop cutting wages. The pledges failed Hoover increased public works – government financed building projects. Asked the nation’s mayors and governors to increase spending – Feared deficit spending = spending more than came in.

VI. Promoting Recovery continued Americans blamed the Republicans. In midterm congressional election of 1930, Republicans lost 49 seats and lost their majority in the House.

VII. Pumping Money into the Economy Hoover tried to persuade the Fed. Reserve to increase currency in circulation – would not. Hoover set up the National Credit Corporation (NCC), which created a pool of money to rescue banks, but not enough to help. In 1932, set up the Reconstruction Finance Corporation to make loans to banks, railroads, and agricultural institutions. Too cautious, so economy continued to decline.

VIII. In an Angry Mood By 1931, discontentment led to violence. Looting, rallies, and hunger marches began. Between 1930 and 1934, creditors forclosed on almost 1 million farms. Some farmers destroyed their crops hoping to drive up prices.

VIII. Angry Mood continued In 1924 Congress had enacted a $1000 bonus to be paid to veterans in 1945. But, they needed it now. In 1932, the “Bonus Army” marched to Washington to lobby Congress to give it to them early. They were run out by the US army under General Douglas MacArthur, by Hoover’s orders. Several died as a result

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