1. Causes of the Great Depression - Hoover

2. Charting Causes of the Great Depression
Definition & How it Contributed to the
Great Depression
Over Production
( too much inventory, not enough buyers)
By the end of the 1920s, factories produced too many durable goods (known as over-production) People did not need as many appliances and cars by the end of the decade (under-consumption)
Farming Problems
Problems for farmers and industry -Railroads, textiles, coal were losing money and faced competition from cars, synthetic fabrics, natural gas.
During WWI, prices rose and international demand for crops such as wheat and corn soared. The end of WWI led to a decline in demand for agricultural products and a 40% decline in crop prices
Farmers boosted production. Farmers could not pay back loans and many had their farms foreclosed. Rural banks also began to fail. Congress tried to help farmers out by implementing price-supports
Note: (The government would buy surplus crops at guaranteed prices and sell them on the world market. but Pres. Coolidge vetoed the bill.

3. Definition & How it Contributed to the Great Depression
Causes
Definition & How it Contributed to the Great Depression
Living on Credit
Used credit to live beyond their means. This was often in the form of an installment plan (usually in monthly payments) that included interest charges.
Americans generated large debts, and had to cut back on spending by the end of the decade.
Uneven Distribution
Wealthiest 1% of population rose by 75%, compared to 9% increase as a whole for all Americans. 70% of Americans were considered “poor” (earned less than 2,500 year) so most of the spending was done by 30% of the population.
Note: Economists estimate that the average man or woman bought a new outfit of clothes only once a year. Scarcely half the homes in many cities had electric lights or a furnace for heat. Only one city home in ten had an electric refrigerator. This unequal distribution of income meant that most Americans could not participate fully in the economic advances of the 1920s.

4. Stock Market Speculation
Causes
Definition & How did it contribute to the Depression?
Stock Market Speculation
People were engaging in speculation—that is, they bought stocks and bonds on the chance of a quick profit, while ignoring the risks
The stock market soared throughout the 1920s and people speculated by buying on margin.
Buy on Margin
Paying a small percentage of a stock’s price as a down payment and borrowing the rest.
The stock market was not regulated which allowed some companies to alter their stock values to increase profits… This created a “bubble” in the stock market. If value of stock declined, borrowers had no way to pay off stock.
On October 29, 1929 (Black Tuesday) the stock market crashed . Black Tuesday—the bottom fell out of the market and the nation’s confidence. People rushed to sell, stock prices dropped, and investors lost a total of $30 billion. Speculators who bought on the margin, could not pay off their debts

5. After the crash, people tried to withdraw their money from banks
When banks could not produce money for all their customers, (b/c they invested in the stock market) the banks failed
This led to a run on banks across the U.S… hundreds of banks failed (In 1929, 600 banks closed. By 1933, 11,000 of the nation’s 25,000 banks had failed) and thousands of people lost their savings
The Stock Market Crashes In early September 1929, stock prices peaked and then fell. Confidence in the market started to waver, and some investors quickly sold their stocks and pulled out. On October 24, the market took a plunge. Panicked investors unloaded their shares. But the worst was yet to come.
BLACK TUESDAY On October 29—now known as Black Tuesday—the bottom fell out of the market and the nation’s confidence. Shareholders frantically tried to sell before prices plunged even lower. The number of shares dumped that
day was a record 16.4 million. Additional millions of shares could not find buyers. People who had bought stocks on credit were stuck with huge debts as the prices plummeted, while others lost most of their savings. By mid-November, investors had lost about $30 billion, an amount equal to how much America spent in World War I. The stock market bubble had finally burst.
The banking failure and stock market crash led to the collapse of thousands of businesses

6. The Great Depression led to a global depression in Europe, Asia, and Latin America
World trade fell by 40%
To encourage citizens to buy from U.S. companies (not foreign competitors) the government passed new high tariffs…
…European nations responded with their own tariffs which made it difficult for U.S. companies to sell their goods overseas

7. From 1929 to 1932, unemployment grew to 12 million people
When the Great Depression began, millions of people lost their jobs or took pay cuts to keep their jobs
From 1929 to 1932, unemployment grew to 12 million people
Americans lacked confidence in the future so they tried not to spend money
Financial Collapse
The stock market crash signaled the beginning of the Great Depression—the period from 1929 to 1940 in which the economy plummeted and unemployment skyrocketed. The crash alone did not cause the Great Depression, but it hastened the collapse of the economy and made the depression more severe.
BANK AND BUSINESS FAILURES After the crash, many people panicked and withdrew their money from banks. But
some couldn’t get their money because the banks had invested it in the stock market. In 1929, 600 banks closed. By 1933, 11,000 of the nation’s 25,000 banks had failed. Because the government did not protect or insure bank accounts, millions of people lost their savings accounts. The Great Depression hit other businesses, too. Between 1929 and 1932, the gross national product—the nation’s total output of goods and services—was cut nearly in half, from $104 billion to $59 billion. Approximately 90,000 businesses went bankrupt. Among these failed enterprises were once-prosperous automobile and railroad companies. As the economy plunged into a tailspin, millions of workers lost their jobs. Unemployment leaped from 3 percent (1.6 million workers) in 1929 to 25 percent (13 million workers) in One out of every four workers was out of a job. Those who kept their jobs faced pay cuts and reduced hours.
The decline in consumer confidence made the depression drag on until the 1940s

8. The Great Depression led to a collapse of the American financial system by 1933
Americans lost confidence in banks as 25,000 banks failed; The lack of banking meant there was no money for investment
The lack of spending and stock market crash led to failure of 90,000 businesses
Unemployment peaked at 25% of all Americans; People lost their homes, farms, and businesses
The USA had record poverty and suicide rates and healthcare declined; Charities offered soup kitchens and breadlines to help

9. The effects of the depression were made worse by the Dust Bowl
Decades of over-farming and droughts in the Plains led to windstorms that swept away soil and made farming impossible
Farmers in the Plains (called “Okies” and “Arkies” left their farms and searched for work or for better land in West coast states

10. Hoover private charities to help (“volunteerism”)
When the Great Depression began, Republican President Herbert Hoover tried to solve America’s economic problems
President Hoover believed that America could overcome the depression through “rugged individualism” (using hard work and perseverance)
Rugged Individualism- that local organizations and charities should provide direct relief
Hoover private charities to help (“volunteerism”)
He encouraged business growth, wanted to keep taxes low, and avoided direct gov’t intervention
Woody Guthrie

11. National Credit Corporation
Hoover tried to ease the nation’s credit crisis with the creation of the NCC
The NCC held a pool of private money that it could lend to banks so that banks could continue to offer loans; the NCC, however, never had enough cash to meet the demand and so was a failure

12. Under Hoover, the gov’t issued relief checks to help the unemployed
As the depression worsened, Hoover called for more direct government action to ease peoples’ suffering
Under Hoover, the gov’t issued relief checks to help the unemployed
Congress created the Reconstruction Finance Corps (RFC) to loan money to save failing businesses
When the NCC failed, Hoover resorted to government lending
The RFC was created to make direct loans to banks & railroads
Even the RFC could not meet the demands for loans, and the economy continued to fail

13. Congress approved new building projects ( Emergency Releif & Construction Act) to put Americans to work like the Hoover Dam
One of Hoover major efforts to address the economic crisis was the 1930 Federal Farm Board.
Did not work.

14. Hawley-Smoot Tariff
Designed to help famers, it was expanded to include large number of consumer goods
established the highest protective tariff in United States history.
When European nations responded with tariff on American goods, international trade dropped dramatically. BY 1934 trade was down two- thirds from its level in 1929
Another trigger/cause for world wide depression

15. Breadlines and Soup Kitchens
Events
Effects of the Great Depression
Hunger Marches
Crowds of the unemployed and hungry began to hold large-scale demonstrations across the US. Protesters chanting “Feed the hungry, tax the rich” were blocked from marching by the police
Farmers Revolt
Farmers began to destroy their crops and produce in an effort to increase prices. Some even resorted to burning their crops for heat in their home. Anger continued to grow as more and more farmers had their land foreclosed on by banks
Breadlines and Soup Kitchens
As unemployment approached 30%, many people began to rely heavily on soup kitchens and breadlines run by churches, charitable organizations, & some city governments in order to survive
Hobos
Hundreds of thousands of homeless, jobless men began to live a nomadic lifestyle, moving from place to place usually by illegally hiding on freight trains.
Often lived in temporary Hoovervilles called “hobo jungles” along the railroad tracks
Hooverville's
In large cities, as people could no longer afford to pay rent, they were forced into homelessness. Many began to live in homemade shacks that they built in any open space available – whole villages of such shacks began to appear, mockingly referred to as “Hoovervilles”

16. Americans who lost their homes, lived in shantytowns nicknamed “Hoovervilles”
“Hoover Hotels”
“Hoover Blankets”
“Hooverville”

17. The Bonus Army
In 1924, Congress had promised to pay every WWI veteran a $1000 bonus in 1945
May 1932 – over 15,000 vets arrived in DC to lobby Congress to move the bonuses up – Congress voted against the idea
After the vote, much of the Bonus Army remained in Washington, living in Hooverville's and vacant buildings
Pres. Hoover ordered them dispersed; after the DC police failed, Hoover sent in US Army, who used tear gas and bayonets to clear the Bonus Army out

18. By the election of 1932, Americans were looking for new leadership and a president who could save them from the Great Depression
Republicans nominated Hoover, while Democrats ran NY Gov. Franklin Delano Roosevelt
Hoover continued his mantra that recovery was just around the corner, while Roosevelt pledged himself to a “new deal” for the American people
Roosevelt won easily

19. Creating a Plan to Get America out of the Depression
Although historians and economists differ on the main causes of the Great Depression, most cite a common set of factors, among them:
tariffs and war debt policies that cut down the foreign market for American goods 2) a crisis in the farm sector 3) the availability of easy credit 4) an unequal distribution of income 5) Bank failures 6) Stock market speculation and buying on margin 7) bank failures
These factors led to falling demand for consumer goods, even as newly mechanized factories produced more products. The federal government contributed to the crisis by keeping interest rates low, thereby allowing companies and individuals to borrow easily and build up large debts.
At first people found it hard to believe that economic disaster had struck. In November 1929, President Hoover encouraged Americans to remain confident about the economy. Yet, the most severe depression in American history was well on its way.

20. Group Activity: Saving the Future! Get Us Out of the Depression
Instructions: With a partner, you will play the role of an economist/advisor for future president FDR. Your job is to help provide him a plan to get the economy out of the depression so he can win the election. You will have to give him the pros and cons of the plan so he can evaluate which plan to choose. Your plan should include the following steps:
Step #1- Identify the goal and what is the problems.
Step #2- Brainstorm 6-9 ways to fix the problems.
Step #3- Pick 2 plans out of step #2, give the plans a name, and list the Pro’s and Con’s of each plan.