Chapter 14 Section 1
Sick Economy
Industries in Trouble
Mining and lumber started to be in less
demand during the 1920’s
Railroads, textiles, and steel barely made
profits during the 1920’s
Farmers Need Help
1919-1921, farm income in USA declined
from $10 billion to $4 billion
Many farmers lost their farms
Gov’t tried to set price supports to help the
farmers
Price Supports for Farmers Fails
Gov’t would buy surplus crops at
guaranteed prices and sell on world
market
– President Coolidge vetoed the bill twice
– “Farmers never made money, nothing we can
do about.” Coolidge
Living on Credit
People were living beyond their means
during the 1920’s
Bought too much on credit/installment plan
People struggled to pay their debts which
led to a decrease in spending
Rich/Poor Divide Grows Wider
During the 1920’s, rich got richer and poor
got poorer
Richest 1% saw their income rise 75%
Rest of America saw their income rise 9%
70% of Americans earned less than
$2500/year
Election of 1928
Hoover (R) vs Smith (D)
Overwhelming victory for Hoover
Smith was 1st Roman Catholic to run for
president
Stock Market
More and more people invested in the
market
Stock prices rose steadily during the
1920’s
4 million Americans owned stock in 1929
(3% of population)
People were buying on speculation, or for
a quick profit
Were also buying on margin, using an
installment plan to buy stocks
Black Thursday
October 24 1929, stock market took a
plunge and people began to dump or sell
stocks
Black Tuesday
October 29, 1929 stock market crashes
16.4 million shares of stocks were sold in
one day
Millions of shares couldn’t find buyers
People who bought on margin now owed
huge debts
Others lost their life savings
By mid November, $30 billion was lost by
investors
Great Depression
Market crash signaled the start of the
Great Depression
Was a time of record unemployment and a
falling economy during 1929-1940
Bank & Business Failures
Gov’t did not insure banks
Half of the country’s banks closed by 1933
Millions lost their money in banks
90,000 businesses failed
25% unemployment in 1933
People who kept jobs faced pay cuts and
hours reduced
USA GDP was cut in half
Most of the world fell into this depression
Hawley Smoot Tariff
Highest protective tariff in US history
Passed by Congress in 1930
Was supposed to protect US businesses
Didn’t work
Causes of Great Depression
Tariffs and war debts from WWI cut down
on worldwide market for US products
Farming crisis
Availability of easy credit
Unequal distribution of income
Shantytowns
Little towns made up of shacks
Soup Kitchens & Bread Lines
Offered free and low cost food
People waited in lines for food provided by
charities or the gov’t
Effects on Minority groups
Latinos and African Americans faced a
more difficult time during the depression
They had a higher unemployment rate
They were the lowest paid
Faced racial violence from angry whites
who lost their jobs
Depression in Rural Areas
Was not as bad as in the cities
Farmers could grow food for their families
Causes of Dust Bowl
Drought began in 1930’s
Land was overproduced by farmers
Farmers had destroyed protective layer of
grass
Effects on Family Life
More emphasis on family during the
depression
Families played games together
(Monopoly) and listened to the radio
High suicide rate (rose 30%)
Many men left their families out of shame
Hoboes
300,000 or more wandered the country
during the 1930’s
Mostly men
Children Suffer
School years were shortened
Schools closed
1933, 2600 schools were closed across
USA
President Hoover Reacts???
Hoover kept telling Americans to keep
faith in the economy and it will fix itself
Hoover’s reaction or lack of one, angered
many Americans
Mid Term Election of 1928
Democrats won control of Congress
– More democrats in Congress than
Republicans
Federal Home Loan Bank Act
Lowered mortgage rates for homeowners
Helped farmers refinance their farm
mortgages and avoid foreclosure
Reconstruction Finance
Corporation
Passed in 1932 by Congress
$2 billion in emergency money for banks,
life insurance, and large businesses
Most of the money went to large
corporations
Bonus Army
10,000 – 20,000 WWI veterans
Marched into Washington DC
Demanded their bonus they were
promised from gov’t for serving in WWI
Bonus was $500 per soldier
Soldiers wanted it NOW and not in 1945
President Hoover ordered 1000 soldiers to
disband the bonus army
Hoover’s soldiers gassed the Bonus Army
The gassing killed a baby and blinded
another
Two Bonus Army veterans were shot and
others were injured