The Great Depression
The Failure of the
American Dream
Mood of America
• Most people were optimistic about life in the New
Century.
• Medical Advancements had reduced whooping cough,
diphtheria and other diseases.
• Infant deaths had declined sharply since 1900.
• Life Expectancy had gone up. For men: 59 years and
For Women: 63 years!
• The Economy seemed to be on a roll.
• There was nothing that Americans could not do!
Calvin Coolidge
• President of the United States
from 1923 to 1929.
– Became President with the death
of Harding!
• Chose not to run for reelection in
1928!
• Republicans had controlled
Presidency for a Number of
Years, there was no reason to
think that his hand picked
successor would not do well!
• It was according to many, “the
best of times”
Herbert Hoover
• Elected President in 1928.
• Most thought him to be an
honest and trustworthy man!
• Self made millionaire who had
been Secretary of Commerce
under Coolidge.
• Had organized food relief for
starving people of Europe
during World War I.
• He was greatly admired by
most people in Government.
American Economy
• 1925 -Total Value of American Stocks is $27
billion! 1928 -They are worth about 39 billion!
• October of 1929 - Stock values worth $87 billion!
• Real Wages (money actually in your pocket) had
increased more than 40 % since 1914.
• Labor Unions membership declined because
working class people had a pretty good life!
• Everyone was fairly well off (if you were white)
and seemed to be enjoying the good life!
“Everybody ought to be rich”
• Business success in the 1920’s was a religion!
• “The Man nobody knows” was a book of the times
that portrayed Jesus as a businessman who took
12 men from the bottom ranks of business and
forged them into an organization to conquer the
World”
• John J. Raskob - Everybody ought to be rich.
1929 - said that saving $15 dollars per week over
twenty years could bring $400 additional income
per month at retirement!
T
Uneven Riches / Wealth
•• 1929
- 1/10 of
1% of was
The sense
of security
American
false. population had
incomes
of were
moregetting
than
• The Rich
$100,000
Richer. dollars!
• Those
24,000
peoplesociety
held
American
Business
34%
ofdominated
the country’s
total
was
by Huge
savings.
Corporations not small or
medium
sized businesses!
• Of
those 24,000,
513 were
•Millionaires!
In 1929 - 200 American
Companies controlled 49
• 71
percent
of the
percent
of the
economy!
population earned $2500 or
less!
American Economic Problems
• Buying Goods on Credit – People wanted more
– Radios, Vacuums,
Refrigerators.
– All bought on Credit.
– Why?
– Mass Production lowered
costs making goods retail
prices cheaper!
• Installment Buying Is a
Disaster for Americans!
American Economic Problems
• Agricultural Marketing Act (1929) – designed to help farmers “help
themselves”.
– Set up Co-Op Boards to help with production issues.
– Federal Farm Board – half billion dollars available to loan out to
struggling farmers.
– Grain Stabilization Corp./Cotton Stabilization Corp.
• Goal: bolster sagging prices by buying up surpluses
• Had Opposite Effect: Wheat -57¢/bushel Cotton =5¢
• Hoover Attempts to Solve Problems: Congressional Action!
• Hawley-Smoot Tariff (1930)
– Highest protective tariff in the nations history!
– Average duty increased from 38.5% to 60%!
– Foreign Nations thought it was like a declaration of Trade War!
“Get Rich Quick”
• This mentality permeated American Life in the 20’s.
• Small Investors bought stocks and dabbled in the stock
market with their life savings!
• Many bought goods “On Margin” which means they paid
10% to 50% in cash and financed the rest!
• Brokers who loaned them the money charged 30-40%
interest rates and could demand repayment at any time!
Markets became saturated
• Too Many Goods, Too Little
Demand!
• People could not afford to buy
goods as fast as they were
being made!
• Most businesses that relied on
each other such as Auto,
Rubber and Steel industries
each experienced slow down
periods.
• Housing Starts fell 25% in one
Year!
Hard Times for American Farmers
• American Farmers were
able to produce more
goods and products as
a result of the Industrial
Revolution.
• However, once
European farmers
recovered from WWI.
The market for food
products closed up
quickly!
BLACK TUESDAY
October 29, 1929
The Details of A Crash
• Stock Market dominated the news of the Summer
and Fall.
• September of 1929 - Prices fell slightly, but no
one was worried - they would recover!
• October 23rd - Stock market dropped 21 points in
one hour! People were starting to panic!
• October 24th - Panicked investors sold their
stock.
• GE stock had sold for $400 a share now $283!
• US Steel was $262 Now $193!
October 29, 1929
• 16.4 million shares were
sold on one day!
• One year earlier, there
were 4 to 8 million traded
daily!
• Prices slumped
$14,000,000 dollars in one
day!
• Many people did not
immediately recognize the
seriousness of the
CRASH!
CHAOS!
• Some Investors leapt to their deaths in New York
City immediately after hearing the News!
• Many people couldn’t handle the failure that an
event such as this would bring to their reputations
and families!
• Many felt disgraced and ashamed that they had
been foolish enough to get caught up in this!
The Collapse Continues
• Some investors pooled their money and went to
the floor of the stock market and bought stock to
try and stop the chaos that had ensued!
• One man purchased between 20 and 30 million
dollars worth of stock but it was too late!
• The Crash would cause at least $30 billion in
losses!
• By November of 1929, the Dow Jones had fallen
from 381 to 198.7. It would never recover!
Rich stock investors
• The Stock Market Crash did
not hurt if it was not your
main source of Income.
• However, if this was how you
made your living, as many
people did, then the results
were horrendous!
• About 4 million people of 120
million in the USA had
invested in the Stock Market!
• They suffered first !
Everyday People felt the effects!
• Thousands of Americans were laid
off or had their pay cut each week!
• 1931 - Henry Ford closes Detroit
Auto plants and lays off 75,000!
• No Unemployment Insurance
exists!
• By 1932 - 13 Million people were
unemployed!
• Gross National Product : Had been
$103 Billion in 1929 now only $56
billion!
• The CRASH was spreading!
Effects of the Crash
• Restaurants close - No
Customers!
• Small Businesses close!
• Some Towns Are Gone!
• Farm Prices fell considerably!
• Wheat - 1929 = $1.04/bushel
• 1932 - Brought ,38 Cents!
• Plus - Drought in Plains States!
Hotel Clerks in New York began asking guests if their room was
for “sleeping or jumping”
Stockholders lost $40 billion in paper values! (More than the entire
cost of WORLD WAR I)
Banks Fail All Across the USA
• Most Banks that opened in
the 1920’s had no federal
restrictions!
• Many did not have an
adequate amount on
Reserve in their Vaults!
• Most banks use your money
to loan to other people and
make money on the interest
they charge on the loans!
Banks Closed at the Rate of 2 per day between 1923 and 1929
The Chaos Continues
• The effects of the CRASH were felt World Wide by
1933.
• International Markets were closed to Investment
because there was no money to spend!
• The Leading economy of the World was in a
shambles and therefore so was everyone else’s!
• US Companies no longer invested in German
Corporations and thus Germany stopped paying
its War Debts to the USA. German Banks also
failed!
• Europeans had no money for American Goods!
Unemployment Figures
Gross National Product Figures
“Brother, can you spare a dime?”
• 9 Million Dollars in Savings
Accounts disappeared!
• Millions of People were
Evicted from their Homes!
• Many people moved in with
Relatives and Friends.
• Those who could not ended
up in shanty towns made
out of cardboard, tin and
other scrap materials.
• Called “HOOVERVILLES”
Farmers took a Hit
• Food Prices fell and farmers incomes dwindled!
• When many could not pay their mortgages, they
lost their farms to banks that were still standing!
• In the South, tenement farmers and
sharecroppers were expelled by their landlords!
• Many farmers protested the low prices and
deplorable conditions by dumping milk, eggs and
butter in public protests seen in Newsreels of the
day!
• Drought and Dust Storms swept across the Midwest!
• They were called the “Black Blizzards”
•Because of low prices and crop failures many just left!
• 400, 000 people left Oklahoma in the 1930’s!
• 300, 000 people left Kansas!
• About 100, 000 Dust Bowl Migrants left for California!
• Many People Starved
Hoover: No Direct Assistance
• He would assist Railroads,
Banks and other top levels of
Economic Structure, but no
direct relief to people!
• Trickle Down Economics!
• He lent money to bankers
through RFC
– Lent to Agricultural
Organizations but no direct
relief.
• He eventually relented and
asked for funds from congress
for Public Works!
Hoover attempts to Help
• Public Spending - $2.5 billion for public works.
– HOOVER DAM –approved in 1923, actually began in 1930.
• Created a huge manmade lake for irrigation.
• Muscle Shoals Bill – A Proposal to build a Dam on the TN
River….vetoed by Hoover. Approved by FDR.
• Reconstruction Finance Corp – Last ditch attempt to help by loaning
money to insurance agencies, banks, etc.,…More of a NEW DEAL
PROGRAM!
• Norris-LaGuardia Anti-Injunction Act (1932) – Made “yellow Dog
Contracts” Illegal.
Problems for Hoover
• Banks continued to fail throughout the Country.
• Hoover refused to provide direct federal relief.
• People were going hungry and a newspaper printed a
photo of him feeding his dog on the White House Lawn!
• He did finally let the RFC loan money to states for
unemployment relief. Too little too late!
• 20,000 jobless WWI veterans marched on Washington
and camped out near the capital.
• They called themselves the “Bonus Army”
Bonus Army members wanted Congress to give them their veterans
pension (payable in 1945) now so they could live!
Congress Said NO!
Hoover sent in the Army under Douglas MacArthur to drive the Bonus
Army out!
Many Bonus Army members fought the Army with Rocks, Bricks and
Stones!
This Public relations disaster made Hoover look look like an uncaring
President!