Hoover’s Rugged
Individualism
Mrs. Post with adaptations from Scott Masters
Powerpointpalooza.com
Election 1928
Herbert Hoover – R
• Secretary of Commerce
• Liked for Adminstrative
Skills & efficiency
• Campaign Slogan:
– “The Poor House is
vanishing from among us”
• Won 58% of popular
vote
Alfred Smith – D
• Progressive Style Leader
• Combined with
Progressive Party
• Campaign Slogan:
– “The Party of Progress and
Thought”
• People didn’t like him
because of his Catholic
Faith
1920’s Booming Economy
Credit:
• Many Americans bought on
“credit” living outside means in
a “roaring lifestyle”
• Buy now, payback over time
• Generated “false” prosperous
economy
• 1929 purchases = 7 billion on
credit (six times higher than
1915)
– What were people buying?
Cars, Radios, Kitchen
Appliances
• Warning: “in economic
downturn, such debt could
cripple”
Playing the Market
•
Millions “played” in Stock Market, buying & selling for profit
– due to supply & demand theory
•
•
•
Bull = prices in upward trend (charging up, up, up)
Bear = prices in downward trend (falling down, down, down)
Buying on the Margin = buying stocks on credit with downpayment *****
– Investors only had to pay 10% of stock’s actual value at time of purchase
• Bull Market = okay because you’d make money
• Bear Market = have to sell/ lose money from purchase price and still owe!
•
Stock Speculation
– Buy/sell quickly to make a quick buck
– Inflated real value of a company’s stock
– False sense of security in the market
“Sooner or later a crash is coming, and it may be terrific [immense].”
Roger Babson, stock analyst 9-1929
The Crash!
Black Thursday
October 24, 1929
• Rising Interest Rates + Nervous Investors
• Investors sell stocks
• Stock Prices PLUNGE
• Everyone’s selling
• “Panic gripped Wall Street”
• “It came with a speed and ferocity[cruelty] that
left men dazed. The bottom simply fell out of the
market…”
New York Times
Reporter
Black Tuesday
October 29, 1929
• 16million + shares dumped in one day
• Prices sank (Supply & Demand)
• Brokers called customers who bought on
“Margin”
• By mid-November, $30 BILLION loss by
stockholders
• “We have now passed the worst and
…shall rapidly recover.” – Pres. Hoover
Banking Woes
• Impact of crash felt by banks – Why?
• Customers defaulted on loans
• Banks closed with little cash reserves
(your money!)
• Panic – customers rushed to banks to
withdraw life savings
• 1930 –1932 = 5,000 banks closed
• In 1930 a large NYC bank closed wiping
out 400,000 people’s money
Business Woes
• Consumers were buying on credit
• Margin Buying + The Crash + Bank
Failures = 54,285 business close by 1932
• World trading at standstill due to countries
with WWI debt
• Businesses close = Unemployment
skyrockets
President Hoover Responds
• Rugged Individualism:
– believed that the gov't should not play an active
role in the economy
•
persuaded bankers/business to follow his
policy of VOLUNTARY NON - COERCIVE
COOPERATION
– where he gave tax breaks in return for
private sector economic investment
•
organized some private relief agencies for the
unemployed
•
worked out a system with European powers
that owed U.S. money as a result of WWI
debts = HOOVER MORATORIUM
– put a temporary stop to war debt &
reparations payments
– Euro. countries were to purchase American
goods instead to stimulate American
economy
• in early 1931 these measures
appeared successful, but
then......the TARIFF WARS
• SMOOT HAWLEY
– Democrats in Congress passed a high
tariff to protect U.S. industry
• hoped to stimulate purchasing of U.S.
goods
– this turned out to be a fatal error...
• Congress did not understand that
the world had become a GLOBAL
ECONOMY
– in retaliation
• other countries passed high tariffs
• no foreign markets purchased
American goods,
• so U.S. productivity decreased even
more
•
also in 1931, the Soviets flooded the
world market with cheap wheat (1/2
U.S. price) in an attempt to get money
to pay back Austrian banks
– but price was too low and they couldn't
•
this resulted in the BANKERS’ PANIC
• Austrian banks borrowed from
German banks and appealed to the
BANK OF INT'L SETTLEMENT
– French denied
– Austrian banks and loaning
German banks therefore were
forced into bankruptcy
• b/c German banks had
borrowed from Americans, >U.S. banks began to go
bankrupt
– wiping out life savings of
thousands of Americans
• Hoover was increasingly
unpopular, but he continued to
try...
 he persuaded Congress to
establish the RECONSTRUCTION
FINANCE CORPORATION
– had power to make emergency loans
to banks
but it was too little too late…
• Hoover wouldn't involve himself
in any programs of direct gov'tal
aid to individuals
– didn't want to erode Americans sense
of "RUGGED INDIVIDUALISM"
Bonus Army
• people were frustrated - isolated protest
movements
– EX: Dairy farmers frustrated w/low price of milk refuse
to sell (dump it)
– EX: WW1 Veterans (pensions discontinued by
Congress) march on Washington = BONUS MARCH
(by BONUS ARMY)
• they reached Washington by 1931,
– set up shantytowns = HOOVERVILLES
– food scraps = HOOVER-MEALS
– hitchhiking journeys = HOOVER RIDES)
• after one year they were forcibly dispersed by
the Army (Generals MacArthur & Eisenhower)