Was the Great Depression a disaster waiting to
happen?
A) Let’s take a step back…
Social Climate:
Singing, dancing, jazz, prohibition, speakeasies, flappers, bootleggers,
buying on credit – WERE THEY HAVING SUCH A GOOD TIME, THAT NO ONE
WAS PAYING ATTENTION TO THE ECONOMY?
Political Climate:
Warren G. Harding – Promised to return the US to “normalcy”
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What did that mean? Normalcy?
Harding was a conservative who felt the Progressive Era had complicated
things. His “normalcy” included a return to Laissez Faire. What did this
mean for our economy?
And the US would be independent of foreign influence. What would this
look like?
He rewarded friends and contributors with powerful positions. This led to
corruption, including the Teapot Dome Scandal. Which led to prison terms
for some of those friends!
Teapot Dome Scandal: a bribery scandal over the leasing of government oil
reserves to private oil companies – one spot was in Teapot Dome, WY,
hence the name.
Calvin “Silent Cal” Coolidge – Simple policies and conservative values
Coolidge continues with Laissez Faire policies.
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B) Early warning signs, aka “Um, why was no one paying attention????”
1) Agriculture -
 Farmers continued to produce more and more food due
to technological advances, like the tractor.
 As production grew, farm prices dropped. It was simply
a matter of supply and demand.
 Farmers reacted in the traditional manner and boosted
production even further. Prices plummeted.
 Farmers began to default on their loans, and the banks
foreclosed.
 To make matters worse the central part of the nation
was hit with a terrible drought. Farmers were devastated.
The drought turned that portion of America into what was
called “The Dust Bowl.”
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Go grab a book, and turn to page 644
Time
Out!
A) What features of land and climate make the Great Plains
a good farming region? What features make it a poor
farming region?
B) What caused the black blizzards of the 1930’s? Could
they have been prevented? Why, or why not?
2) Uneven distribution of wealth – Rich got richer, poor got poorer
 In the 1920’s America’s economic policy was “laissez-faire.”
 Businesses were left alone, and for some time, thing looked
fine. Production was at an all time high.
 The problem was that while earning rose, and the rich got
richer, the working class received a disproportionally lower
percentage of the wealth. This uneven distribution of
wealth got so bad that 5% of America earned 33% of the
income. This means less and less REAL spending (they bought
on credit). Despite the fact the working class had less money
to spend, businesses continued to increase production levels.
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3) European Depression
 Since Europe was in a depression, people there weren’t buying
as much as businesses estimated. Then, the Hawley-Smoot
Tariff raised tariff levels to as much as 40%. Angry Europe
responded with tariffs of their own. International trade
was at a standstill.
At this point you should be asking, “If no one is buying, and
companies were increasing production levels, wasn’t there
going to be a problem?” BINGO!!
4) As a result o World War I, America had emerged as the world’s
leading creditor nation. Foreign powers owed the United States,
and it’s companies, about a billion dollars annually. With declining
trade, a demand for repayment from the US, and the continuing
European depression this debt went unpaid.
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C) But Americans seemed to feel our prosperity was going to last
forever! With this confidence, Americans began to increasingly invest in
the stock market. On margin! Not a good idea.
Buying stock on margin means buying it on credit. You paid only a small
down payment, and promised to pay the rest when the stock pays off big.
But, if the stock value decreases, you still owe the original loan price.
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The Downfall:
 September 2, 1929 – the market reaches a record high of
381.
 October 24, 1929 – panic selling begins as 12.8 million
shares change hands.
 BLACK TUESDAY – October 29, 1929 – The market
plummets.
 By June 1930, the Dow has reached a low of 41.22
 Millions upon millions of dollars are lost.
 Many who had bought on margin had to pay back debts
with money they didn’t have.
 Many banks had invested heavily in the stock market and
real estate, and lost their depositors money.
 People lined up at bank to withdraw their money – it was
gone!
 Businesses closed because they couldn’t pay their bills.
 Unemployment rose to 25-35%
 In Toledo, OH, fully 80% of the workers were unemployed!
 People’s mortgage payments and debt stayed the same, but
the income was gone!
 Banks foreclosed on loans and took possession of worthless
properties.
 Between 1930 and 1932, over 9,000 banks failed!
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D) What would Herbert Hoover do?
With all of this, President Herbert Hoover announced to Americans that
they should “stay the course, “ and that the “ship would right itself.”
After all, Hoover was a self-made man, a rugged individualist.
Yes, the Hoover Dam is named for him
Hoover believed that caring for the hungry and cold was a local
government and volunteer/charity responsibility. He said his job was to
cut taxes and expand public works spending.
Issues:
1) Obviously the economic issues
2) Bonus Army
a. Veterans’ of WWI were promised a bonus of up to $500 for
their military service – but it was issued in a certificate that
would mature in 20 years. (They would get the money then)
b. In simple terms, the veterans needed the pay out much
sooner! They organized a march in Washington, and
camped out in “Hoovervilles.” There was an attempt, by
police, to move the veterans from their campsite. Shots
were fired, and two veterans were killed.
c. Hoover then called in the Army to physically remove the
veterans and their families. Chaos ensued. This doesn’t
make for very good public relations!
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Too little, too late:
1) Hoover supported giving indirect support to banks and public
works projects, but NOT in giving direct aid to the public. He
believed it was socialist in nature, and would weaken public
morale.
2) Reconstruction Finance Corporation – agency to help keep key
businesses in place, thus hopefully helping the economy
E) Election of 1932 – Hoover (Republican) vs. FDR (Democrat)
Some campaign propaganda:
Republican – Elephant; Democrat = Donkey
GOP = Grand Old Party/ Republican
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What did Roosevelt promise?
He promised a “New Deal” but said very little of how that would happen,
or what it would look like. Americans just wanted something different!
And that’s what he promised!
Outcome:
FDR’s Inauguration:
FDR and Hoover in FDR’s Inauguration Parade
“So, first of all, let me assert my firm belief that the only thing we have to
fear is...fear itself — nameless, unreasoning, unjustified terror which
paralyzes needed efforts to convert retreat into advance.”
FDR’s Inauguration Speech
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