The Great Depression
1928 - 1932
Causes of The Great
Depression
Intro Video
1. Uneven Distribution of
Wealth
• Workers output increased 32%, wages
increased 8%
• Corporate profits increased 65%
• 60% of families earn less than $2,000/yr.
• The wealthy minority did not buy enough to
keep the economy going
2. Easy Credit
• People accumulated
more and more debt
each year
• 80% of all radios and
60% of all cars
purchased were bought
using credit
3. Stock Speculation/ Crash
• Soaring stock prices
were based on
confidence rather than
reality of profits
• Investors continued to
buy on margin
• These led to the Stock
Market Crash
Stock Market Crash
• October 23, 1929 – Dow Jones drops 21%
in 1 hour
• October 24, 1929 – Black Thursday,
Investors lost confidence and began to sell
• October 29, 1929 – Black Tuesday, the
Stock Market Crashed when over 16
million shares of stock were sold that day
• From 1921 to 1929, the Dow Jones rocketed
from 60 to 400
• In October 1929, the Dow sank from 400 to
145
• $140 billion of depositor money disappeared
because banks had invested depositors money
in stocks
• The Dow Jones finally surpassed its 1929
high, a full 26 years later in 1955.
• By October 27, 1929 RCA was trading at
$58.50 per share when the first wave of
selling on “Black Monday“, October 28,
1929 brought the shares down ($18.375) to
close at $40.25 per share on the day. By
August 11, 1932, RCA was trading at
$8.875 and hit a 1932 low of $2.50 per
share
• Stock prices on Sept. 3, 1929, Oct. 29,
1929 and Nov. 15, 1929
• General Electric- $396.25, $210.00,
$201.00
• Hershey Chocolate-$128.00, $108.00,
$68.00
4. Banks Collapse
• Depositors rushed to withdraw money from banks
• The Fed limited the money supply to discourage
lending
• Banks did not have sufficient reserves
• 1929 – 641 banks failed
• 1930 – 1,350 banks failed
• 1931 – 1,700 banks failed
5. Tariffs
• Hawley-Smoot Tariff 1930
• Extremely high tax imposed on imported goods
• Destroyed international trade by closing off markets
Congress passed the Hawley-Smoot Tariff
to protect American manufacturers from
foreign competition.
The strategy was
a mistake. Other
nations retaliated
and raised tariffs
as well.
The resulting drop
in world trade only
made the glut of
American factory
and farm products
harder to sell.
6. Businesses Close
• When businesses
closed people lost
their jobs
• By 1933,
unemployment
reached 25%
• The stock market crash didn’t start the Great
Depression by itself. Instead, it quickened the
collapse of the U.S. economy.
Effects of Great Depression in
Rural and Urban Areas
• Bread lines were
run by Churches
and Private
Charities
Poverty in Rural America
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Crop prices fell
Drought in the Great Plains
One million farmers lost their farms
Some worked as tenant farmers
Dust Bowl struck the southern Great Plains
Dust Bowl
Migration
• Dust Bowl Video
• Families migrated out of the region to escape
the Dust Bowl and depression
• Dust Bowl refugees were called “Okies”
• Rural to Urban
• Went looking for jobs but found none
Poverty in America’s
Cities
• Loss of jobs, wages, and hours cut
• Many sold furniture, jewelry to get money
• Lost their homes
• Moved to Hoovervilles
• Shantytowns of shacks built on public land or
vacant lots
• Used scrap metal, glass, tin, lumber
• Used newspaper to keep warm
Hoovervilles
Hoover’s Response
• Voluntarily work toward common goals
• Asked business men to keep employment,
wages, and prices at current levels
• Called for tax reduction, lower interest rate,
and create public-works programs
• Asked wealthy to give money to charity
Volunteerism Fails
• Businesses continue to fail and lay off
workers
• Local governments cannot provide jobs
Hoover Creates the RFC
• Reconstruction Finance Corporation gives
loans to big businesses and banks
• Businesses and banks were supposed to
hire new employees and give loans to more
businesses
• This policy is known as Trickle-down
Economics
• Was this effective?
RFC was ineffective
• Businesses do not hire workers
• Bankers keep money for themselves
• Unemployment remains high
Bonus Army
• WWI veterans marched on Washington
demanding their bonus congress had
promised them
• Congress passed a bill to pay the bonus early
• Hoover vetoed it
• General Douglass MacArthur and federal
troops were called to clear out the Bonus
Army
• MacArthur used force without Hoover’s
permission
Hoover’s Success
• Boulder Dam (Hoover
Dam)
• Created much needed
jobs in Southwest
• Provided electricity
and irrigation