1. HIS 112 Chapter 26 The Shaken Dream and the New Deal, 1929-1933

2. Overview Country was optimistic in 1928 when Herbert Hoover was elected as president Hoover knew there were some weaknesses in the economy and some divisions in society but thought he could fix all that When the stock market crashed in 1929, Hoover and everyone else was shocked

3. This crash affected the whole economy and resulted in the Great Depression Americans couldn’t understand why people were going hungry when farmers bins were overflowing, people were out of work when they were willing and able, and factories closed when they could function

4. Americans’ belief that if you work hard, you will succeed, was shaken They looked to Herbert Hoover for help, and he did little So they didn’t re-elect him in 1932 Franklin D. Roosevelt, a Democrat, became president

5. The New Day, 1929-1933 This was the name given to the Hoover Administration His cabinet was comprised largely of wealthy businessmen who believed in the old ways and in a capitalist utopia; they didn’t want innovation Hoover did have a group of young advisors called the New Patriots who felt science and efficiency could be applied to government

6. There was some business optimism: a new building called the Empire State Building was being built; when this office building was completed in 1931, many offices were left vacant Hoover believed that individuals were responsible for themselves Government should have only a limited role in people’s lives This thinking did not match the reality

7. The Crash and the Great Depression The stock market crashed on 29 October 1929 There had been warning signs; however, Hoover felt the stock market’s ills could be quarantined from a generally healthy economy

8. Causes:  Increasing weakness of the economy of the 1920s 1._______________________________________________ ________________________________________________ 2._______________________________________________ ________________________________________________ 3._______________________________________________ ________________________________________________

9. Underconsumption  1.___________________________________ ____________________________________  2.___________________________________ ____________________________________

10. Unequal distribution of income  1. ____________________________________ ____________________________________ ____________________________________  2.___________________________________ ____________________________________

11. Large Corporations  ____________________________________ ____________________________________ ____________________________________ ____________________________________ ____________________________________ ____________________________________ ____________________________________

12. Speculation in the stock market  Stock purchases made with borrowed money  People bought stock “On Margin” Put 10% of purchase price down When stock goes up, sell some and pay off what is owed Brokers’ loans totaled $6 billion by the summer of 1929

13. International economic troubles  U.S. had loaned lots of money to Europe after World War I  These loans stopped at the end of 1920s  Europeans could not borrow more money and they couldn’t sell goods easily in U.S. because of tariffs  They bought less from U.S. and defaulted on loans  The depression became international in scope

14. Government policies and practices  Lack of federal regulation to curb speculation in the market  Federal Reserve had easy-credit policies and charged low discount rates

15. Little or no economic information available  No computers, for example, to give instant information