HOOVER, THE CRASH OF 1929, &
THE GREAT DEPRESSION
Mr. Ermer
U.S. History Honors
Miami Beach Senior High
ROOT PROBLEMS
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Maldistribution of Wealth: Top 5% of households hold 30% of income
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2/3 of American families live on very little earnings
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Lack of diversification in the American economy
• Most of the wealth of the 1920s generated from construction & automobile production
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Installment plans for expensive goods
• As demand falls, workers laid off, demand continues to fall
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1920s: Banks slowed lending to foreign companies/countries
• Exports fall as Americans lose jobs
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Federal Reserve (FED) did not have safeguards against speculation
• Mismanaged interest rate levels
• Declining American exports to Europe as European industry recovers
• Insecure international debt structure
• American banks loan money to Europe after WWI, increasing postwar European debt
• Great Depression spreads to Europe and other countries indebted to U.S. banks
IMMEDIATE CAUSES
• 1928 Presidential candidates campaign on continued prosperity
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Alfred Smith’s campaign sunk by anti-Catholic backlash
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February 1928: Stock market begins year and a half of steady rise
• Speculation and margin buying drives 1920s bull market
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Falling stock prices force lender margin calls
• October 29, 1929: Black Tuesday market crash
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Loss of credit, bank losses, stock prices drop drastically
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Bank runs cause more bank closures
• The stock market crash of 1929 was the big hit on a weak system with
many problems at its roots
THE STOCK MARKET CRASH
HARD TIMES
• Big industrial cities paralyzed by high unemployment
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Unemployment and poverty seen as signs of personal failure
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Government and charitable organizations unable to meet demands of unemployed
• Farmers forced into foreclosure, horrible drought in plains = Dust Bowl
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Still, farms were producing more food than Americans could afford, prices drop fast
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Many families leave for other places like California (called Okies as most came from Okla.)
WORSENING DEPRESSION
• Hobos roam country after being ejected from homes by bailiffs
• Art and Entertainment are happy escape for struggling people
• Movies and radio shows
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Radio soap operas
•
The Wizard of Oz and Gone With The Wind
• Literature and Art
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William Faulkner’s The Sound and the Fury
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Grant Wood’s American Gothic
PRESIDENT HOOVER
RESPONDS
• President Hoover’s Laissez-Faire stance does not convince the public
• American Individualism and private sector responsibility was Hoover’s strategy
• The failure of volunteerism
• Can’t raise taxes, can’t lower taxes—Republicans lose Congress in 1930
• Hoover asks FED to put more money in circulation, they refuse
• National Credit Corp. (NCC) fails to expand credit
• Congress passes Emergency Relief & Construction Act
• $1.5 Billion to states for relief (payments to suffering people)
• $300 Million for public works construction projects
• Hunger marches, farmer protests, and the Bonus Army