The Great Depression Chapter 21

Reasons for the Great Depression – DO NOT COPY Credit Debt Loose Reg. of stock market/businesses European War Debts Conservative Policies Overproduction LED TO….. –BANK FAILURES –BUSINESS FAILURES –UNEMPLOYMENT

Reason #1:CREDIT Americans bought products on installment plans 1929 – 6 X’s higher than 1915 Int. rates low – promote business FED. RESERVE tightened credit to slow purchasing => DEFLATION

Reason #2:STOCK MARKET bull market –upward trend in stock prices (1920s) 2% of US invested –Stock Speculation –buying /selling to make a quick profit inflated prices of stocks –Businesses – inaccurate books –margin buying –purchasing stocks with borrowed money 10% on a stock/ borrow the rest

STOCK MARKET CONTD –Black Thursday – Oct. 24, 1929 –Black Tuesday – Oct. 29 ($30 billion lost) GE: $396; $34 US Steel: $261$21 - it became a bear market

Reason #3: European War Debts massive war debts Not importing US goods Smoot – Hawley Tariff –high tariffs on imported goods

Reason #4: Conservative Policies No reg. on businesses –Booming – look away Tax Cuts – Trickle Down Theory Reduced power of labor unions High Protective tariffs

Trickle Down Theory

#5 - Overproduction Farmers –Overproduction= Europe stops buying –Debts = losing homes –Suffering in the 1920s –1 st to experience Depression Industry –Mass production

Effect #1: BANK FAILURES borrowers defaulted on loans life savings lost if a bank closed BANK RUNS - withdrawal all their money –5,000+ banks failed

Banks – Khan Academy Khan Academy - simple banking

Effect #2:Business Failures No $ to buy products No loans from banks layoff employees Gross national product – total value of all goods and services produced in year – $103 billion – $56 billion

BUSINESSES CONT – 26,000 businesses went bankrupt 1931 – 28,285 more 1929 – unemployment was 3.2% 1932 – it was 23.6 %

Effect #3 - Joblessness 1929 – 1.5 million were unemployed1929 – 1.5 million were unemployed 1933 – 15 million1933 – 15 million decreased wages or hours decreased wages or hours AA usually the 1 st workers to be firedAA usually the 1 st workers to be fired

Election of 1928 Herbert Hoover – Rep. Republicans – booming 20s Acceptance speech for Rep. ticket: “ We in America today are nearer to the final triumph over poverty than ever before in the history of this land... We shall soon with the help of God be in sight of the day when poverty will be banished from this land." Al Smith CATHOLIC ANTI-PROHIBITION NYC

Hoover wins – because he is not Catholic

Life in Cities Salvation Army and Red Cross provided relief to needySalvation Army and Red Cross provided relief to needy Breadlines – poor could get soup and breadBreadlines – poor could get soup and bread Shantytowns - aka “Hoovervilles”Shantytowns - aka “Hoovervilles”

Bonus Army 1932 – 10,000 WWI vets came to D.C.1932 – 10,000 WWI vets came to D.C. Bonus BillBonus Bill –Early payment of the pension bonuses Congress rejected the bonus billCongress rejected the bonus bill 2,000 vets defied order to leave DC2,000 vets defied order to leave DC Army removed themArmy removed them – Douglas MacArthur – machine guns, tanks, and tear gas

Election of 1932 Republicans – HooverRepublicans – Hoover Democrats – Franklin D. RooseveltDemocrats – Franklin D. Roosevelt – wealthy, famous family –Wife was Eleanor – VP candidate in 1920 – Polio – paralyzed from waist down – Gov. of NY in 1928

Results Roosevelt wonRoosevelt won –23 million popular votes to 16 mill –472 electoral votes to 59 Dems - majorities in both houses of CongressDems - majorities in both houses of Congress