The Beginnings of the The Beginnings of the Great DepressionGreat Depression

Chapter 17Chapter 17

Did you know?Did you know?

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

I. The Election of 1928I. The Election of 1928

The CandidatesThe CandidatesRepublicans nominated Herbert Hoover, Republicans nominated Herbert Hoover,

former head of the Food Administration former head of the Food Administration during WWI. He was a Quaker, and during WWI. He was a Quaker, and promised a continuation of the 1920’s promised a continuation of the 1920’s prosperityprosperity

Democrats nominated Alfred E. Smith, the Democrats nominated Alfred E. Smith, the 4-time governor or New York and the first 4-time governor or New York and the first Roman Catholic nominated for presidentRoman Catholic nominated for president

Religion, Prohibition, and the economy Religion, Prohibition, and the economy became major issues. Hoover won.became major issues. Hoover won.

II. The Long Bull MarketII. The Long Bull Market

The stock market is a system for The stock market is a system for buying/selling shares in a company. buying/selling shares in a company.

The prosperity of the 1920s caused many The prosperity of the 1920s caused many to invest heavily in stocksto invest heavily in stocks

As prices went higher, many bought on As prices went higher, many bought on margin (making a small down-payment; margin (making a small down-payment; pay the rest later)pay the rest later)

When the prices fell, lenders issued When the prices fell, lenders issued margin calls, demanding immediate margin calls, demanding immediate repayment.repayment.

III. The Great CrashIII. The Great Crash

By late 1929, a lack of new investors By late 1929, a lack of new investors caused stock prices to drop; margin caused stock prices to drop; margin calls caused many to sell their stocks, calls caused many to sell their stocks, leading to Black Tuesday – Oct. 29, leading to Black Tuesday – Oct. 29, 1929. 1929.

The stock market lost between $10 & The stock market lost between $10 & $15 billion that day$15 billion that day

It DID NOT cause the Great Depression It DID NOT cause the Great Depression directly, but it did undermine the directly, but it did undermine the economy’s ability to recover.economy’s ability to recover.

III. The Great Crash continuedIII. The Great Crash continued

The crash weakened the nation’s The crash weakened the nation’s banks, causing many to close.banks, causing many to close.

Government did not yet insure bank Government did not yet insure bank deposits, so if a bank closed, anyone deposits, so if a bank closed, anyone with money in that bank lost their with money in that bank lost their savingssavings

Resulted in Bank RunsResulted in Bank Runs

IV. The Roots of the Great IV. The Roots of the Great DepressionDepression

Efficient machinery led to Efficient machinery led to overproduction, & Americans could overproduction, & Americans could not buy all of the new stuff.not buy all of the new stuff.

Uneven distribution of wealth; The Uneven distribution of wealth; The top 5% of the population held 30% of top 5% of the population held 30% of the nation’s wealth – that’s a lot!the nation’s wealth – that’s a lot!

Over 2/3 of the nation’s families Over 2/3 of the nation’s families earned less than $2,500 per year.earned less than $2,500 per year.

IV. Roots continuedIV. Roots continued

Low consumption – workers wages did not Low consumption – workers wages did not increase enough to keep up with the quick increase enough to keep up with the quick production of goods. As sales decreased, production of goods. As sales decreased, workers were laid off. Chain reaction.workers were laid off. Chain reaction.

Many Americans bought on the installment Many Americans bought on the installment plan (paying off debts in small increments.plan (paying off debts in small increments.

Hawley-Smoot Tariffs raised tax on Hawley-Smoot Tariffs raised tax on imports, so foreign nations raised tariffs on imports, so foreign nations raised tariffs on us. Hurt the economy.us. Hurt the economy.

Instead of raising interest rates, Federal Instead of raising interest rates, Federal Reserve lowered them, so people Reserve lowered them, so people continued to practice speculation.continued to practice speculation.

V. The Depression WorsensV. The Depression Worsens

By 1933, thousands were out of work. By 1933, thousands were out of work. The unemployed relied on soup The unemployed relied on soup

kitchens and bread lines set up by kitchens and bread lines set up by charitiescharities

Many were evicted or forclosed on for Many were evicted or forclosed on for non-paymentnon-payment

Those who lost their homes lived in Those who lost their homes lived in shantytowns called “Hoovervilles,” shantytowns called “Hoovervilles,” showing who they blamed for the showing who they blamed for the nation’s troubles.nation’s troubles.

V. The Depression Worsens V. The Depression Worsens continuedcontinued

Many hobos (homeless Americans who Many hobos (homeless Americans who wandered looking or a better life) traveled wandered looking or a better life) traveled on Railroads seeking opportunity.on Railroads seeking opportunity.

As crop prices dropped in the ’20s, Many As crop prices dropped in the ’20s, Many farmers left their fields fallow – the farmers left their fields fallow – the Drought of 1932 led to the “Dust Bowl.”Drought of 1932 led to the “Dust Bowl.”

Those who lost their farms often traveled Those who lost their farms often traveled to California as migrant labor.to California as migrant labor.

VI. The Dust BowlVI. The Dust Bowl

The most famous work of literature The most famous work of literature of the time was “The Grapes of of the time was “The Grapes of Wrath” by John Steinbeck.Wrath” by John Steinbeck.

It described a family, the Joads, who It described a family, the Joads, who lost their farm and traveled to lost their farm and traveled to California. It wasn’t any better there.California. It wasn’t any better there.

VI. Promoting RecoveryVI. Promoting Recovery

In an effort to promote economic In an effort to promote economic recovery, Hoover received a pledge recovery, Hoover received a pledge from industry to keep factories open from industry to keep factories open and stop cutting wages. The pledges and stop cutting wages. The pledges failedfailed

Hoover increased public works – Hoover increased public works – government financed building projects. government financed building projects. Asked the nation’s mayors and Asked the nation’s mayors and governors to increase spending – Feared governors to increase spending – Feared deficit spending = spending more than deficit spending = spending more than came in.came in.

VI. Promoting Recovery VI. Promoting Recovery continuedcontinued

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

VII. Pumping Money into the VII. Pumping Money into the EconomyEconomy

Hoover tried to persuade the Fed. Reserve to Hoover tried to persuade the Fed. Reserve to increase currency in circulation – would not.increase currency in circulation – would not.

Hoover set up the National Credit Corporation Hoover set up the National Credit Corporation (NCC), which created a pool of money to (NCC), which created a pool of money to rescue banks, but not enough to help.rescue banks, but not enough to help.

In 1932, set up the Reconstruction Finance In 1932, set up the Reconstruction Finance Corporation to make loans to banks, railroads, Corporation to make loans to banks, railroads, and agricultural institutions. Too cautious, so and agricultural institutions. Too cautious, so economy continued to decline.economy continued to decline.

VIII. In an Angry MoodVIII. In an Angry Mood

By 1931, discontentment led to By 1931, discontentment led to violence. Looting, rallies, and hunger violence. Looting, rallies, and hunger marches began.marches began.

Between 1930 and 1934, creditors Between 1930 and 1934, creditors forclosed on almost 1 million farms. forclosed on almost 1 million farms. Some farmers destroyed their crops Some farmers destroyed their crops hoping to drive up prices.hoping to drive up prices.

VIII. Angry Mood continuedVIII. Angry Mood continued

In 1924 Congress had enacted a $1000 In 1924 Congress had enacted a $1000 bonus to be paid to veterans in 1945.bonus to be paid to veterans in 1945.

But, they needed it now. In 1932, the But, they needed it now. In 1932, the “Bonus Army” marched to Washington to “Bonus Army” marched to Washington to lobby Congress to give it to them early.lobby Congress to give it to them early.

They were run out by the US army under They were run out by the US army under General Douglas MacArthur, by Hoover’s General Douglas MacArthur, by Hoover’s orders. Several died as a resultorders. Several died as a result

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