Ch. 14
The Great Depression
Begins
U.S. History
Causes of the Great Depression

1) Problems in Industry 

Over production of goods. Demand for many
goods fell, factories laid off workers…
2) Problems in Agriculture 
Over-production by farmers caused crop
prices to fall. Many farms could not make a
profit and foreclosed upon…
Causes of the Great Depression

3) Increased Consumer Debt  Many Americans lived beyond their means.
Easy credit (buy now, pay later) on the
installment plan increased debt for families.
Many cut back on spending…

4) Uneven Income Distribution –
 Not all Americans shared in the prosperity of the
1920s. During 1920s, income of wealthiest
Americans rose much more than the average
family. The poor got poorer, could not afford to
buy all the goods factories produced…
Causes of the Great Depression

5) Buying on Margin and Speculation –


People began engaging in speculation buying stocks to make a quick profit &
ignoring risks. Many began buying on
margin - paying a small percentage of stock’s
price as a down payment & borrowing the
rest from a broker. Brokers borrowed money
from banks.
Unrestrained buying & selling fueled
market’s upward spiral. Rising prices did not
reflect companies’ worth.
Causes of the Great Depression

6) Federal Reserve’s
Monetary Policy 
Federal Reserve (created by President
Wilson in 1913) served as the nation’s
central bank (loaned money & set interest
rates for other smaller banks).


Fed. Reserve concerned about
“speculation” – chose to raise
interest rates on loans in 1928 to
discourage “bad” investing and
bring down inflated stock prices.
Result: Slowdown in economic
activity, together with high interest
rates, was likely the most important
source of the stock market crash that
followed October 1929.

Herbert Hoover Becomes
President (1928)



Republicans choose
Herbert Hoover as
presidential candidate in
1928. Popular, head of
Food Administration
during WWI.
Hoover believed in
“rugged individualism” –
people could solve their
own economic problems &
government should not
meddle in those problems.
Herbert Hoover won 1928
Presidential election.
President Herbert Hoover

Stock Market Crash



Early September 1929 stock
prices began to fall. Some
investors quickly sold their
stocks and pulled out (ex:
Joseph Kennedy).
October 1929 – Black
Tuesday – the bottom of the
market fell out.
Shareholders frantically tried
to sell before prices plunged
lower. Millions could not find
buyers.
People who had bought on
credit were stuck w/ huge
debts. Others lost most of
their savings. Stock market
crash signaled beginning of
the Great Depression.

Bank & Business
Failures



After the crash, people
panicked and withdrew
their money from banks.
Some could not get their
$ because banks had
invested it in the stock
market.
By 1933, 11,000 of
nation’s 25,000 banks
had failed. Millions of
Americans lost their
savings accounts.
90,000 businesses went
bankrupt. Unemployment
rose to 25% by 1933.

Depression in the Cities



People lost jobs, evicted
from homes, ended up in
the streets. Some slept
in parks or sewer pipes,
wrapped in newspaper to
keep warm.
Others used scrap
materials to build
shacks. Shantytowns –
little towns consisting
of shacks, sprang up.
Soup kitchens offering
free or low cost food and
bread lines were
common.
Unemployment Lines
Shantytowns or “Hoovervilles”

Depression in Rural
Areas


Farmers had one
advantage over city
dwellers – most could
grow food for their
families.
With falling prices and
rising debt, thousands
of farmers lost their
land. By 1932, 400,000
farms were lost to
foreclosure.

The Dust Bowl



Dust Bowl occurred in
the Great Plains states.
Caused by drought &
decades of harsh
farming. Removed the
protective layer of
prairie grasses which
held down the topsoil.
Windstorms scattered
millions of tons of
topsoil and sand.
Thousands of farmers
were evicted. Many
migrants (known as
Okies) followed Route
66 to California to work
as farmhands.
The Dust Bowl

Men, Women,
Children during the
G.D.


“Hoboes” –
homeless, jobless
men wandered the
country looking for
work. Hitched rides
in railroad boxcars
and slept under
bridges.
Women - many felt
they had no right to
work when men were
unemployed. Often
starved in their
homes.

Men, Women,
Children during the
G.D. (cont.)


Children suffered
from malnutrition &
disease. Falling tax
revenues caused
thousands of schools
to close.
“Hoover tourists” –
teenagers who left
home to ride the rails
in search of work,
adventure, escape
poverty.

Opinion Turns Against
Hoover



Experts believed depressions
were a normal part of the
business cycle. Best to do
nothing and let economy fix
itself.
Americans grew more frustrated
by the depression. Hoover held
firm to his belief in “rugged
individualism” and refused to
support direct relief or govnt
welfare. Hoover seen as a cold
& heartless leader.
Shantytowns called
“Hoovervilles”, newspapers
called “Hoover blankets”, empty
pockets turned inside out called
“Hoover flags”.
Hoover’s name became an object of ridicule

Hoover’s Attempts to Ease the Depression

Smoot-Hawley Tariff (1930)
Tariff became the highest peace-time barrier in the
nation’s history.
 Average duty on non-free goods raised from 38.5% to
nearly 60%.
 Foreign countries interpreted tariff as an economic
declaration of war.
 Trade gaps widened
 Worsened the existing international economic
depression.
 International financial chaos resulted in U.S. becoming
even more isolationist


Federal Home Loan Act (1932)

Lowered mortgage rates for homeowners & allowed
farmers to refinance to avoid foreclosure.

Hoover’s Attempts to
Ease the Depression (cont)

Reconstruction Finance
Corporation (1932)
RFC provided up to 2
billion in emergency
finances for banks,
railroads, large businesses.
 Benefits would trickle
down to citizens through
higher wages, job growth.
Highly criticized as helping
the rich & poor Americans
could not wait for benefits.

Hoover’s Attempts to Ease the Depression (cont)

Mexican Repatriation


In order to free up jobs for Americans,
Hoover authorized the deportation of
anywhere from 200,000 – 300,000
Mexicans.
 Over the next 10 years, the Mexican
population in the US dropped by
40%.
 Later, President Franklin Roosevelt
ended federal support of
deportations, but many state and local
governments continued with their
efforts.
Estimates now indicate that
approximately 60 percent of the people
deported were children who were born
in America and others who, while of
Mexican descent, were legal citizens.

Hoover & the Bonus Army
(1932)



“Bonus Army” of WWI
veterans came to support a
bill up for debate in
Congress. Bill would
authorize immediate
payment of $500 bonus to
veterans.
Hoover feared bonus
marchers were “communists
& criminals”. When bill was
defeated, Bonus Army
refused to leave.
Hoover sent 1000 soldiers to
gas & disband Bonus Army.
Hoover’s image suffered,
Americans outraged at
treatment of veterans.
Bonus Army Veterans
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Ch. 14 – The Great Crash