Great Depression
Causes of the Great Depression
• Stock Market Crash- Black Tuesday- October
29, 1929
– Stock prices had fallen the Thursday before
– The wealthy bought a lot to stabilize
– Stock prices continued to fall
Causes of the Great Depression
• Uneven income distribution- wages had not
risen that much
• Speculation- people bought stock believing
the price would go up and they could sell for a
quick profit
– “Buying on margin”- people borrowed money to
buy stock making low down payments; when
market crashed, people lost everything
Causes of the Great Depression
• Excessive use of credit- also called installment
buying; 1920s advertising stimulated
consumers’ desire to buy goods
• Overproduction- businesses produced too
much and workers did not have high enough
wages to buy them
• Weak farm economy- prosperity never
reached farmers due to overproduction, high
debt, low prices, and drought
Causes of Great Depression
• Government policies- laissez-faire policies did
little to regulate these problems; high tariffs
hurt farmers and international trade
• Global economic problems- Europe never
recovered from WWI; most nations were
interdependent in banking and trade
Effects
• Worst in 1932
• GNP dropped from $104 billion to $56 billion
in 4 years
• Income declined over 50%
• 20% of banks closed
• $10 million in savings
• 25% unemployment
Hoover
• Thought prosperity would return
• Did not ask for Congress’ help until summer of
1930
• Thought government assistance to individuals
would destroy self-reliance
• Thought relief efforts should be state level
Hoover’s Foreign Response
• Hawley-Smoot Tariff- increased tariff to satisfy
business owners who thought higher tariffs
would protect their businesses
– European countries enacted higher tariffs in
responses
• Suspended Dawes Plan- plan for US to collect
war debts; Hoover suspended this plan; many
bankers withdrew their money
Hoover’s Domestic Response
• Federal Farm Board- created in 1929 but
powers were expanded; government held
surplus grain and cotton in storage; did not
stop surplus
• Reconstruction Finance Corporation- gave out
emergency loans to help businesses; thought
loans would “trickle down” to help lower
classes
• Home Loan Bank Act- gave federal loans to
homeowners to prevent foreclosures
Despair and Protest
• Farmers got together to stop banks from
foreclosing on farms and evicting them from their
homes
– Farm Holiday Association- stopped entire crop of grain
to keep it from reaching market
• Bonus March- thousands of unemployed WWI
vets to demand bonus payments they were
promised at a later date (1945)
–
–
–
–
Bill failed to pass
2 veterans killed
Hoover ordered army to break up march/camp
Many thought Hoover was uncaring
Election of 1932
• FDR nominated for Democrats
– Promised a “new deal”
• FDR wins in a landslide
• Hoover became a “lame duck”
– 20th amendment shortened period between
election and inauguration