Great Depression of the 1930s
Boom to Bust

Most Americans believed the economic prosperity of the 1920s would
last forever because:
–
Companies were producing 50% more from the beginning to
the end of the decade
– National income had grown from $64 billion to $87 billion
– Most major corporations were making large profits
– Everyone was making money in the Stock Market
Boom to Bust

What happened?
–
Warning signs of economic trouble were missed or ignored including:
– Excessive buying with credit created superficial prosperity
– Iron, railroad, & automobile industries weren’t as prosperous
– Farms nationwide were suffering heavy losses
Election of 1928

Herbert C. Hoover became
the 31st U.S. President

In his inaugural address,
Hoover pointed to future
prosperity for the American
people.

“We in America are nearer to
the final triumph over poverty
than ever before.”
Stock Market Crash of 1929

Throughout the 1920s, stock prices rose steadily

In order to take advantage of this “bull market”, Americans rushed
to buy stocks & bonds in an attempt to “get rich quick”

Because most Americans were “buying on margin” the rising
stock prices did not reflect a companies’ actual worth

If stock prices declined, where would they get the money to pay off
their loans?
Stock Market Crash of 1929

In early September 1929, stock prices started a steady decline
causing some investors to sell their stocks

On October 21 and 23 major declines hit the stock market
followed by temporary recoveries
– The 2nd recovery was engineered by JP Morgan and Company
and other big name bankers.
– This bailout conspicuously (noticeably) bought up stocks to
gain people’s confidence

On Black Thursday October 24th panic selling hit the New York
Stock Exchange as stock prices plunged & investors sold quickly
Stock Market Crash of 1929

On Black Tuesday October 29th confidence in the market
completely shattered as over 16 million stock shares were sold

Investors that had bought stocks on credit were stuck with huge
debts & others lost all savings
Economic Collapse

The Crash signified the start of the
Great Depression

The Crash led to bank closings &
business failures.

Many Americans attempted to
withdraw their savings from banks,
but some couldn’t because many
banks had also invested in the
stock market.
“Brother Can You Spare a Dime”
Fact or Fiction?

Many people believe the Great Depression
began with, or was caused by the stock market
crash
–
Is this true?
The stock market crash of 1929 did not so much cause the
Depression as help trigger a chain of events that exposed
longstanding weaknesses in the American economy.
(page 662)
Causes of the Great Depression

End of “easy money” in the US
– In the 1920s, Americans made & spent money with ease,
businesses earned large profits, & investors received
substantial dividends, but this prosperity eventually ended

Mal-Distribution of Wealth
– In the1920’s, a decade of economic growth occurred but more
than 50 % of American families were below minimum
subsistence levels. Industrial and agricultural production
increased but workers and farmers were not sharing in the
profits. Not enough people could afford the numerous goods
being produced. Lacked purchasing power.
Causes of the Great Depression
–
–

As a result construction, auto, coal, and other industries found
decreased demand. Employees were laid off, which led to
even less purchasing power.
In many expanding industries technology replaced the need for
workers. In 1929 it became difficult for these workers to find
more jobs as the economy slowed.
Excessive borrowing of money – Most Americans bought goods &
stocks on credit with the expectation that it would be easy to repay
their debts
Causes of the Great Depression

High tariffs had a negative affect on world trade
– High tariffs prevented other countries from selling their goods
in the U.S., in turn preventing them from securing the money
needed to buy American products

Credit structure of the economy
– Farmers were in debt. Crop prices too low to allow them to
pay off their mortgages. Small banks especially those involved
in this industry were struggling.
– Some of or country’s biggest banks were investing recklessly
in the stock market & making unwise loans.
Causes of the Great Depression
Life during the Depression

Cities
–
–
–
People lost their jobs & were evicted from their homes
Shantytowns, soup kitchens, & bread lines became common
Unemployment rates rose especially among African & Mexican
Americans
Life during the Depression

Rural Areas
–
–
Thousands of farmers lost their land & turned to tenant farming
in order to survive
Dust Bowl


Due to over-plowing the protective layer of prairie grasses was
removed allowing winds to carry dust hundreds of miles
Parts of Kansas, Oklahoma, Texas, New Mexico, & Colorado
became known as the Dust Bowl as dust storms led to thousands
of farmers & sharecroppers left their land behind.
The Dust Bowl
"And then the dispossessed were drawn west- from Kansas,
Oklahoma, Texas, New Mexico; from Nevada and Arkansas,
families, tribes, dusted out, tractored out. Car-loads, caravans,
homeless and hungry; twenty thousand and fifty thousand and
a hundred thousand and two hundred thousand. They streamed
over the mountains, hungry and restless - restless as ants,
scurrying to find work to do - to lift, to push, to pull, to pick,
to cut - anything, any burden to bear, for food. The kids are hungry.
We got no place to live. Like ants scurrying for work, for food,
and most of all for land."
- John Steinbeck, The Grapes of Wrath, 1939
Dust Bowl
Dust Bowl
Dust Bowl
Dust Bowl
Dust Bowl
Dust Bowl
“Okies”


Thousands of families migrated to California and other states
(usually conditions not much better)
Called “Okies” because many came from Oklahoma
President Hoover’s Efforts

After the Stock Market Crash, President Hoover tried to assure
Americans that the economy was on solid ground

Despite some urging direct relief from the federal government,
Hoover believed relief should be provided by individuals, charities,
& local organizations

His response only frustrated those struggling as the depression
grew worse
Troubles Worsen

Spring 1931- international financial panic
–
–
–
–

1920’s European nations relied on U.S. banks for
loans
After 1929 they could not receive these loans
“financial fabric of several European nations began
to unravel (667)”
One of the Largest banks in Austria collapsed
U.S. economy quickly plummeted to new lows
Congress Responds

Congress met December 1931
–
Conditions were desperately bad, causing Hoover to
support a series of measures that would keep
endangered banks afloat and protect homeowners
from being foreclosed upon.
Reconstruction Finance
Corporation



Bill passed January 1932
Formed the RFC-a government agency
provided federal loans to troubled banks,
railroads, etc.
Made $ available to local governments allowing
them to support public works projects and relief
efforts
RFC and Hoover


Early Hoover programs small scale
RFC-Large scale
–
1932 budget-$1.5 billion dollars
Shortcomings of the RFC



Only lent to businesses
with sufficient collateral
A lot of money went to
Big corporations and
banks
Only funded public
works projects that
would ultimately pay for
themselves (ex: toll
bridges)
What is collateral?
a borrower's pledge of
specific property to a
lender, to secure
repayment of a loan
RFC


Did not have enough money to make a
significant impact on the Depression
Did not spend all the money it had either
–
$300 million available for local relief efforts

–
RFC only lent out $30 million of that
$1.5 billion budget only lent out 20%
President Hoover’s Efforts

Despite some success from the Boulder Dam project (later
renamed the Hoover Dam), President Hoover’s inaction led to him
being unfairly blamed for the Depression

Shantytowns became known as “Hoovervilles” & the homeless
wrapped themselves in newspaper known as “Hoover Blankets”
“Hoovervilles”
Bonus Army



Congress had promised World War I veterans bonuses to be paid
in 1940.
Many veterans were jobless & homeless as a result of the
depression & marched to Washington D.C. to ask Congress to
pass a law granting the bonuses early.
With Hoover’s backing, the Senate voted down a bill that would
provide the bonus
Bonus Army

After a few thousand veterans &
their families remained to protest,
General Douglas MacArthur
decided to drive the Bonus Army
out of Washington

The result was intimidation of
veterans & their families including
one death, which the public reacted
to angrily
Question for Review
Why was Hoover so unpopular with many
Americans?
Election of 1932

Franklin D. Roosevelt became the
32nd U.S. President by defeating
Hoover

Roosevelt’s campaign focused on the
depression.

Roosevelt promised that the federal
government would “take action” by
providing direct relief to combat the
depression
FDR’s 1st Inaugural Address
“Let me assert my firm belief that the only
thing we have to fear is fear itself.”
A New Deal for the American
People

FDR promised the American
people he would provide relief,
recovery, & reform to get the
country out of the depression

Through his alphabet agencies,
FDR was taking action