Post on 25-Dec-2015
Causes of the Depression
• Election of 1928 Herbert Hoover nominated by
RepublicansSuccessful engineerSeven years as Secretary of
Commerce Alfred Smith nominated by
DemocratsGovernor of NYRoman-CatholicIrish-American
Causes of the Depression
• Campaign Issues Prohibition major issue Smith’s Catholicism Prosperity of 1920’s claimed by
Republicans Hoover won election
Causes of the Depression
• The Long Bull Market Prosperity of 1920’s drove up prices of
stock Stock Market – system for buying &
selling shares of companies Bull Market – prolonged period of heavy
investment Margin – the purchase of stocks using
down payment of 10% with rest owed to stock broker or bank
Margin Call – demand that the investor repay the loan at once
Speculation – buyers hoping to make a fortune took risks
Causes of the Depression
• The Great Crash By late 1929 the stock bubble was
recognized and experienced traders started selling
Prices slipped causing more to sell Margin calls were made forcing people
to sell stocks for less than they paid October 24 “Black Thursday” – market
prices plummeted October 29 “Black Tuesday” – stocks
lost $10 -$15 billion in value Most money gone – people in debt Stock market lost $30 billion in value
Causes of the Depression
Banks weakened – had lent money to investors to buy stocks and had invested bank money in stocks
With less money, banks could not make loans – caused recession
Some banks forced to close (end of bank) causing bank runs
Bank runs – people pull all their money out of the bank causing the bank to close
During first two years of Depression 3,000 banks closed (10% of nation’s total)
Causes of the Depression
• Roots of the Great Depression Stock market crash caused recession
but other forces caused Depression Overproduction – factories and farms
more efficient and produced more goods but low wages meant people bought less
Installment Plan – consumers bought goods by making down payment then making monthly payments
Consumers now paying down debt – not making new purchases
No purchases meant factories lay off workers – chain reaction
Causes of the Depression
Loss of Export Sales – banks lent money to stock speculators instead of foreign companies so fewer foreign companies bought American products
Hawley-Smoot Tariff – highest tariff ever to protect American business but foreign retaliation caused exports to drop 80%
Mistakes by Federal Reserve – failure to raise interest rates caused businesses to overproduce and led to risky loans
Life During the Depression
• Depression Worsens By 1932 unemployment rate about
25% Average income dropped by 30% Bread Lines & Soup Kitchens – free
food for the needy Foreclosures & Evictions – people
turned out of homes & apartments by bailiffs (court officials)
Shantytowns (Hoovervilles) – shacks made from wood, sheet metal, and cardboard on public lands
Hobos – wanderers going from town to town by rail looking for jobs or handouts
Life During the Depression
• The Dust Bowl Prairie grasses torn up for wheat
fields Low crop prices resulted in fields
left unplanted Drought beginning in 1932 caused
soil to turn to dust High winds caused destructive
dust storms Many farmers had nothing left and
had to migrate – may went to California
Life During the Depression
• Escape People could escape the hard times if
only for a few hours through movies and radio
Many movies contained spirit of optimism
Radio had everything from drama to comedy to music
Daytime dramas known as soap operas Grapes of Wrath – novel by John
Steinbeck describing the hardships of migrant farm family escaping the Dust Bowl
Hoover Responds
• Hoover asked business to keep factories open and stop slashing wages – they complied for awhile then rejected pledge• Increased public works – construction
projects financed by the government• Only way to increase jobs was through
deficit spending – idea rejected• As a result of Depression, Republicans
lost control of the House
Hoover Responds
• Bank closures had diminished money supply
• Hoover requested Federal Reserve to put more currency into circulation – Fed refused
• Hoover set up Reconstruction Finance Corporation – to make loans to banks & businesses
• RFC ultimately failed• Hoover opposed using federal funds for
relief – money going directly to poor families
• By the time he did act it was too late
Hoover Responds
• American public becoming desperate• Oklahoma City – 500 people held
“hunger march” sponsored by Communist Party• Communist Party saw biggest
increase in membership during Great Depression• Many farms foreclosed – farmers
destroyed crops to increase prices
Hoover Responds
• The Bonus March WWI veterans promised $1,000
bonus to be paid in 1945 Hundreds of vets marched on
Washington DC wanting bonus now
Called themselves “Bonus Army” Set up “Hoovervilles” and ranks
swelled to 15,000 Some occupied government
buildings