BUST PART: 1
The Great Depression Begins
As the prosperity of the 1920s ended, several economic
problems gripped the nation.
Section 1: The Nations Sick Economy
Economic Troubles on the Horizon
-Important industries struggled; farmers grew more crops and raised more livestock than
they could sell at a profit.
-RR’s lost business to new forms of transportation.
-Congress tried to help with the McNary-Haugen Bill- which called for federal *Pricesupports for key products such as wheat, corn, cotton, and tobacco.
-The government would buy surplus crops at guaranteed prices and then sell them on the
world market.
-President Coolidge vetoed the bill twice.
Consumers Have Less Money to Spend
-Buying less because of rising prices, stagnant wages, unbalanced distribution of income,
and overbuying on credit in preceding years.
-During the 1920s Americans often bought goods on *Credit- an arrangement in which
consumers agreed to buy now and pay later.
-Large consumer debt piled up and led to people cutting back on spending.
Uneven Distribution of Income
-During the 1920s, the rich got richer, and the poor got poorer.
Election in 1928
*Hoover- (R) Secretary of Commerce- was a mining engineer.
*Alfred E. Smith- (D) a career politician who had served four
years as governor of New York.
-Because most Americans were happy with the previous
Republican leadership, Hoover won an overwhelming victory.
-The stock market had become the most visible symbol of a
prosperous American economy.
-Then, as now, the *Dow Jones Industrial Average- was the most widely used
barometer of the stock market’s health.
-As the Dow rose over the years people were eager to take advantage of the “bull
market.”
*Speculation- the buying of stocks and bonds on the chance of a quick profit, while
ignoring the risks.
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-Many began *Buying on Margin- paying a small percentage of stock prices as a down
payment and borrowing the rest.
The Stock Market Crashes: CLICK HERE
-Early September 1929, stock prices peaked and then
fell.
-Confidence in the market decreased as investor started
to quickly pull out in a panic.
-October 24, the market took and even bigger plunge.
-October 29- *Black Tuesday- the bottom fell out of the
market and the nation’s confidence collapsed.
-By mid-November, investors lost about $30 billion; an
amount equal to the costs we spent on the war.
Financial Collapse: CLICK HERE
-This signaled the beginning of the *Great Depressionthe period from 1929 to 1940 in which the economy
plummeted and unemployment soared.
-The crash alone did not cause the Depression, but it
did hasten the collapse of the economy and made it
more severe.
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Bank and Business Failures
-After the crash, many people panicked and
withdrew their money from banks.
-But some couldn’t get their money out because
the banks had invested in the stock market.
-In 1929, 600 banks failed – by 1933 11,000 out of
25,000 banks failed.
-Million saucer jobs-unemployment went from 3%
in 1929 to 25% in 1933.
-Other countries were also affected by the
Depression. Many countries were still trying to
recover from the ravages of WWI.
*Havley-Smoot Tariff Act- passed in 1930 established the highest protective tariff in US
history.
-This was supposed to protect American farmers, but ended up hurting them.
-By reducing the flow of goods into the US; the tariff prevented other countries from
earning American currency to buy American goods. (World trade declined)
Causes of the Depression:
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Tariffs and war debt policies that cut down the foreign market for American goods.
A crisis in the farm sector.
The availability of easy credit.
An unequal distribution of income.
Section 2: Hardship and Suffering during the Depression
-During the Depression Americans did what they
had to do to survive.
The Depression Devastate People’s Lives
-Hardship, homelessness, and hunger to millions.
-Numerous *Shantytowns- little towns consisting
of shacks-sprang up.
*Soup Kitchens- offered free or low-cost food in
*Bread Lines- or lines of people waiting to receive
food provided by charitable organizations or public
agencies, became common.
-African-Americans and Latino conditions were especially difficult.
-Their unemployment rates were higher, and they were the lowest paid.
-Racial violence increased.
-Latinos, Mexicans, and Mexican-Americans living in the Southwest were also targets.
(Americanization increased)
-One advantage over city life: most farmers could grow food for their families.
-With falling prices and rising debt, many farmers lost their land.
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-1929 to 1932- 400,000 homes was lost through foreclosure.
-Many farmers turned to tenant farming and barely scrape by.
The Dust Bowl: CLICK HERE
-Early 1930s drought began on the Great Plains.
-During the previous decade, farmers had exhausted the land through over production of
crops- the grasslands had become unsuitable for farming.
-When the drought began there was little grass and few trees to hold the soil down.
*The Dust Bowl- the region hardest hit includes parts of Kansas, Oklahoma, Texas, New
Mexico, and Colorado.
-Effect: farmers and sharecroppers left their land and moved west.
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-There was not *Direct Relief- cash payments or food provided by the government to aid
the poor in the early years of depression.
-Women and children also suffered hardships.
-There was a lack of healthcare, food, schools were closed, and children had to work.
-Between 1928-1932- the suicide rate increased 30% and 3 times as many people were
admitted into mental hospitals.
Section 3: Hoover Struggles with the Depression
Hoover- 1928 campaign pledge: “A chicken in every pot and a car in every garage.”
Hoover Tries to Reassure the Nation
-Opposed any federal form of welfare, or direct relief to the needy. He said that handouts
would weaken people self-respect and “moral fiber.”
-Said that individuals, charities, and local organizations should help.
-His response shocked and frustrated suffering Americans.
*Boulder Dam- one project that Hoover approved did
make a difference. (Later called the Hoover dam.)
-World’s tallest and second-largest dam.
-Providing electricity, flood controlled, and a water
supply which enabled the growth of California’s
massive agricultural economy.
THE HOOVER DAM CONSTRUCTION: CLICK HERE
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Democrats Win in 1930 Congressional
Elections
-As the country’s economic difficulties
increased, the political tide turned against
Hoover and the Republicans.
-Republicans lost control in the House and saw
their Senate seats dwindle.
-Some farmers declared a “farming holiday”
and refuse to work the fields.
-Shantytowns became known as
Hooverville’s- a slap in the face at the
president’s policies.
-Hoover refused to support direct relief of
Federal welfare.
Hoover Takes Action
Hoover Backs Cooperatives- backed the creation of the Federal Farm Board- intended
to raised crop prices by helping members to buy crops and keep them off the market
temporarily until prices rose.
-Also tried to prop up banking by persuading the nation’s largest bank to establish the
National Credit Corporation.
-It loan money to smaller banks, which help them not to go bankrupt.
Direct Intervention- late 1931, with presidential elections looming, Hoover appealed to
Congress to pass a series of measures to reform banking, provide mortgage relief, and to
funnel more federal money into business investments.
*Federal Home Loan Bank Act- signed by Hoover in 1932, lowered rates for
homeowners and allowed farmers to refinance their form loans and avoid foreclosure.
*Glass-Steagall Banking Act- separated investment and commercial banking in hopes to
prevent another crash.
*Reconstruction Finance Corp. (RFC)- Hoover’s most ambitious economic measure,
was approved in Jan 1932.
-It authorized up to $2 billion for emergency financing for banks, life insurance companies,
RR’s, and other large businesses.
-Hoover believed that the money would *Trickle Down to the average citizen through job
growth and higher wages.
-Hungry people could not wait for the benefits to trickle down to their tables.
-Federal involvement came too little too late.
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Gassing the Bonus Army
*Bonus Army- Bonus Expeditionary
Force.
-The Patman Bill Denied- 1932- bonus
Army went to DC to support the bill that
was under debate in Congress.
-It authorized the government to pay a
bonus to WWI vets who had not been
compensated adequately for their
wartime service.
-In 1924, Congress passed a bill stating
that the money would be paid out in
1945- but Congressman Wayne
Patman believed that the money should be paid in immediately. (An average of $500 per
soldier.)
-The Senate vetoed down the bill.
-Nervous that the angry mob could become violent, Hoover sent in troops, under
MacArthur and Eisenhower to get rid of them.
-The troops use tear gas- most Americans were outraged at the government’s treatment
of Vets.
The downturn in the economy and Hoover’s
inability to deal effectively with the
depression had sealed his political fate.
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