America and the
Great Crash
Mr. Phipps
U.S. History
California State Standards
• 11.6.1. Describe the monetary issues of the late nineteenth
and early twentieth centuries that gave rise to the
establishment of the Federal Reserve and the weaknesses in
key sectors of the economy in the late 1920s.
• 11.6.2. Understand the explanations of the principal causes
of the Great Depression and the steps taken by the Federal
Reserve, Congress, and Presidents Herbert Hoover and
Franklin Delano Roosevelt to combat the economic crisis.
• 11.6.3. Discuss the human toll of the Depression, natural
disasters, and unwise agricultural practices and their
effects on the depopulation of rural regions and on political
movements of the left and right, with particular attention to the
Dust Bowl refugees and their social and economic impacts
in California.
The Era
• Considered the worst economic catastrophe
in the U.S.
• The American depression was part of global
economic crisis
• The Stock Market crash did not cause the
Depression, only made it happen faster
• The American government radically changed
to respond to widespread economic and
social problems
Part A:
Economic Problems
The Great Depression started as
a series of related economic
problems.
I. The Sick Economy of the
1920s
• The prosperity of the 1920s failed to cover up major
economic problems
• Wages dropped, Production dropped, Unemployment
increased
• Many important industries affected, including:
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Agriculture and Farming
Railroads
Textiles
Steel
Mining
Lumber
Automobiles
Housing Construction
Consumer Goods
At the time of the Great Crash, stock values dropped
from $87 to $19 Billion. Steel production dropped 80%,
and overall industrial output decreased by 50%
II. Consumer Spending
Consumer debt increased from $3 Billion in
1920 to over $7 Billion in 1929.
• Advertising and culture of
1920s emphasized mass
consumption
• Excessive spending
throughout the 1920s
increased debt
• By the end of the 1920s,
consumers were
purchasing less
• Rising prices, declining
wages, and higher interest
payments resulted in
greater debt
III. Distribution of Wealth
• The gap between the rich
and the poor widened
• The wealthiest 1% saw their
income increase by 75%; the
rest of the population
increased less than 9%
• 5% of Americans controlled
1/3 of all the wealth; 70% of
Americans earned less than
a subsistence wage
IV. Speculation on Wall
Street
Stock Speculation -Investors buy risky or
unstable stocks and
bonds hoping for a
quick profit
Buying on Margin -Investors buy risky
stocks on loan, hoping
that the profit, when
sold, would exceed the
loan amount
V. The Laissez-Faire
President
Herbert Hoover (19291933)
• Political Experience
– Graduate from Stanford
– Brilliant Engineer
– Director of Food Administration
during WWI
– Secretary of Commerce (19211928)
• Campaign Promise
– Continued economic prosperity Hoover’s campaign promise was to
assure the American people that there
would be “a chicken in every pot.”
Hoover’s Conservatism
• Believed that Americans
were self-sufficient -rugged individualism
• Argued that government
intervention would ruin
American democracy
• Considered that the
“economic down-turn” of
1929 was part of a
regular business cycle
VI. Foreign Loans
• The Dawes Plan (1924) -- American loans to
Germany (so that Germany could pay WWI
war reparations to Britain and France)
• Hawley-Smoot Tariff (1930) -- Raised
import tariffs on all goods, resulting in higher
expense for good and decreased demand
• Reduction in foreign demand for American
consumer goods -- world trade decreased
by 40%
Foreign Loans Default
Part B:
The Chain Reaction
Economic problems throughout
the 1920s resulted in dangerous
economic instability, setting off a
chain reaction in October 1929.
I. The Pieces
Causes
• Decrease in consumer
spending
• Unequal distribution of
wealth
• Overproduction of goods
• Huge farm surpluses
• Unpaid war debts
• Buying on margin
Effects
• Under-consumption of
goods
• Families had limited
income to buy goods
• Price of goods falls
• Drop in farm prices
• Banks didn’t get back
money
• Stock speculation, buying
on credit, unstable market
By mid-November, investors had lost over $30 billion.
II. The Chain
• Investors call brokers--they want their
money
• Brokers call investors/speculators to
collect money (to pay back loans)
• Investors sell stock at any price,
flooding the market with stocks
• Brokers go under -- stocks are
worthless/Investors lose their savings
• American public panics -- they go to
their banks to withdraw their money
• Banks run out of money and close
down permanently
The Bank Runs
III. The Crash
• September 1929
– Stock Market witnesses
unusual ups/downs
• October 24, 1929
– Stock Market takes major
plunge
• October 29, 1929
– “Black Tuesday”
– Stock Market bottoms out
– 16.4 million shares sold,
causing stock prices to
plummet
– The Stock Market fails to rally
through November,
compounding the economic
problems
IV. The Failure
• Total of 11,000 (of 25,000)
banks failed by 1933
– Panicked, individuals went to
banks to withdraw savings
– Banks loaned out money and
had no reserve savings
– Banks closed permanently,
leaving people stranded
• Over 9 million people lost
their savings
• 25,355 Business fail
• 1/3 of employees laid-off,
unemployment increases to
25%
Great
Crash
World Payments
Investors
Investors lose
millions.
Businesses
lose profits.
Businesses
and Workers
Consumer
spending drops.
Workers
are laid
off.
Businesses cut
investment and
production
Some fail.
Overall U.S.
production
plummets.
Banks
Businesses
and workers
cannot repay
bank loans.
Savings
accounts
are wiped
out.
Banks run
out of
money
and fail.
Bank
runs
occur.
U.S.
investors
have little or
no money to
invest.
Allies cannot
pay debts to
United States.
Europeans
cannot afford
American
goods.
U.S.
investments
in Germany
decline.
German war
payments to
Allies fall off.
Part C: The Hoover
Response
Blamed for the Crash, Hoover
adopted small-scale measures
and indirect aid to deal with the
Depression.
Stage 1: Reassurance
• “Any lack of confidence in
the economic future…is
foolish.”
• Recommends business
as usual
• Contends that the Stock
Market “crash” is a
correction…just part of the
regular business cycle
Stage 2: Business as Usual
• Hoover asks:
– Industry to keep factories open and keep
wages high (pledge lasts less than a year)
– The Federal Reserve Board to pump
more money in circulation (results in
inflation)
– Private industrialists to loan money to the
banks and community
Stage 3: Too Little, Too Late
• Hoover establishes:
– Reconstruction Finance Corporation (1932) in
indirect aid to banks--lends $238 million to banks,
$500 million to insurance corporations, farmer groups,
railroads, and individual governments
– Indirect Aid associations--intended to trickle down
from the top (the rich buy stuff, creating jobs, etc)
• Major Problems:
– Hoover strongly opposed to federal intervention-thought it would ruin feelings of independence
– Government was running out of money
– Indirect aid was not helping those who most needed
it
Hoover’s Dam
Construction Boulder Dam
(now called Hoover Dam)
– Was world’s tallest dam (726
ft.)
– Was second largest (1,244
ft. long)
• Intended to create jobs
and money flow
• $700 million project
• Provided electricity,
water, irrigation, and flood
control to 7 western states
Stage 4: The Bonus Army
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
Washington, D.C., Spring,
1932
• 17,000 World War I
veterans march to the
capital to demand that they
get paid their bonus for
service in the war
• The bonus was scheduled
to be paid in 1945, but
rising unemployment and
desperation forced the
government to response
Bonus Army encampment at Washington, D.C. The process to get one’s
bonus required someone to find their file, bound in red tape and review it.
Thus, to review the file required the government worker to “cut the red tape.”
The Response
Hoover’s Response
• Called “Bonus
Marchers” communists
and criminals
• Congress voted to deny
veterans their bonus
• Ordered the U.S. army
to forcibly remove the
protestors from
Washington, D.C.
The Clash
August 1932
• 2,000 veterans and
their families refused
to leave
• U.S. Army, under
command of Douglas
MacArthur and Dwight
Eisenhower attack
more than half with
tanks and gas
– One baby died, two
vets shot, scores
injured, and many
burned by attack
Hoover’s End
• Americans shocked
by treatment of
veterans
• People felt that Hoover
had no compassion
• Failure to deal with
Depression and the
Bonus Army ends
Hoover’s hope for reelection
Part D: The Social Impact of
the Great Depression
The Great Depression defined an
entire generation: poverty,
unemployment, migrations,
hunger--affected all levels of
society.
I. Foreclosures
• Job losses resulted in defaulted loans and
mortgages
• Banks would take property--thousands lost
their homes including all personal property
II. Hoovervilles
• Foreclosures resulted in
homelessness
• Homelessness resulted
in development of
migrant towns
• Usually outside large
cities, made from scraps,
junk
• Considered crime-ridden
slums
III. Families
Taken by famous
photographer Dorothea
Lange, this picture of a
migrant mother and her
children became the iconic
photo of the Depression.
The poverty of this family is
evident, as is the mother’s
endurance, strength, and
pride. Many husbands left
their families in search of
jobs. Consequently, while
many women were already
jobless (and homeless),
they were also abandoned
by men who, sometimes,
never returned.
Tennessee pea picker family. The intense poverty of the Depression put an enormous
stress on families. In most cases, poor families either had to farm out their children to
relatives, go on welfare, have their kids work, or abandon them to an orphanage.
IV. Migration
Forced to move in search
of a job and because they
had lost their homes to
foreclosure, many families
lived out of their jalopies.
Migrating westward, many
of these families were
seen as a threat to local
workers, particularly in
California. Okies,
migrants from the
Oklahoma dust bowl, and
Arkies from Arkansas were
particularly discriminated
as dirty bums.
V. Breadlines
As a local source for aid,
breadlines distributed foods
within the community.
Although some of these were
funded by the federal
government, most were
subsidized by local charities.
Most breadlines focused on
working men, providing much
needed nourishment before
they found a job. Women,
children, and minorities were
typically barred from eating at
breadlines and soupkitchens. This photo, taken in
San Francisco, underscores
the poverty and desperation
these men felt.
Feeling the Strain
• Impact on Health
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Starvation and hunger
Child malnutrition (rickets and other diseases)
Suicide rate rises 30%
Admission to mental health hospitals triple
• Impact on Family
– Living conditions deteriorate, living in smaller houses or on the road
– Men feel the failure of providing for their family
– Working women accused of job-stealing
• Impact on Minorities
– Competition for jobs increases, producing increased hostility between AfricanAmericans, Hispanics, and Asian-Americans
– Lynching increased
– Aid and relief programs discriminate against minorities
– Mexican-Americans and Americans of Mexican descent deported
The Dust Bowl
Persistent dust storms and
drought in the Midwest
exacerbated the poverty of
regional farmers.
Years of Drought
• Starting in 1930s, the
Great Plains were
gripped by severe
drought and windstorms
• Causes
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Over-farming
Mechanized Farming
Dry irrigation
Single crop
The Dust Bowl
• Areas hardest hit
– Kansas, Oklahoma, New
Mexico, and Colorado
• Many farmers migrated
to the West, particularly
California
• Dust storms powerful
enough to send dust to
NYC, D.C., and other
East coast cities
“Black Sunday”, April 14, 1935 is widely
considered to be one of the worst dust
storms in history. Clogging radiators
and minimizing visibility, cars were
unable to drive safely. Dust storms like
these would completely remove the
topsoil and deposit as far as Canada.
Any new seedlings would be uprooted
by severe winds, choked by dust, or
zapped by the constant electrical
charges of the waterless storms.
The Drought Ends
• Federal education program: how-tofarm films emphasize proper techniques
to save soil
• Decreased demand for staple crops
• Drought cycle ends in some areas
• Parts of Texas, Kansas, and Oklahoma
never recover from Dust Bowl
Summary
• The Great Depression was caused by
many factors:
– Overproduction
– Credit debt
– Rampant consumerism
– Stock speculation
– Increased gap between the rich and the
poor
– Political philosophy of laissez-faire
The Crash
• Stock Market crash was a chain
reaction
– Investors sell watered down stocks quickly
– Investors cash out sell tickets
– Run on banks
– Banks close
– Credit not granted to businesses
– Businesses close
– Unemployment
Hoover
• Hoover fails to economically or
politically address the crisis
– Emphasized indirect aid, small federal
relief efforts, isolated construction projects
– Considered it a part of a regular economic
cycle
– Harshly treated the Bonus Army
– Fails to be re-elected in 1932