Chapter 23

Coming of the

Depression

Worksheet Quiz:Did you read?

1. Why was Hoover so confident America would soon be free of poverty?

2. Due to the polarization of American society in the 1920’s, what did the economy become dependent upon?

3. What caused the “mania” atmosphere around investing in stocks in the 1920’s?

4. What was the name of the day when the market finally took a great crash?

Worksheet Quiz (continued)

5. What was considered the main indicator of economic health during the 20’s?

6. On what date did the stock market crash? 7. Name one of Hoover’s responses to the

Great Crash. 8. What tariff intensified the effects of the

Depression.

Quiz continued

9.Name the shantytowns that lingered throughout the country during the Depression.

10. Name of the group of unemployed veterans that marched on Washington in 1932.

Chapter FocusChapter Focus

Most Americans believed the election of Herbert Hoover in 1928 would bring continued prosperity. This notion quickly faded as the country’s prosperity quickly turned to economic depression. This depression would result in millions being out of work and a desire for a new type of president.

The Stock Market Crash

The Main IdeaThe Main Idea Shortly after the election

of Herbert Hoover, the stock market crashed

sending the nation into economic chaos.

The Election of 1928

Al Smith (D) vs. Herbert Hoover (R) The election of 1928 focused on prohibition and smear campaigns,

instead of key issues. During the campaign, many criticized Smith for being Catholic.

Hoover campaigned on a pro-business speech that stated that the role of government in business should be limited.

In the end, “two cars in every garage” is what cost the Democrats the election.

Hoover won 58% of the popular vote showing a clear mandate for the Republican ideals of the time.

What were they afraid would happen if a Catholic became president?

Hoover in the White House

Hoover called for a commission on the issue of Prohibition. The panel had mixed findings, but most believed that the “noble experiment” had failed. Regardless of these findings, they stated the Prohibition should continue.

Agricultural Marketing Act of 1929 Created the Federal Farm Board to help farm

organizations, create cooperatives, and loan organizations $ to help stabilize prices.

Too little, too late

Upon entering the White House, Hoover said that the United States was,

“in sight of the day when poverty will be

banished from this nation”

Herbert Hoover: A Chicken in Every Pot!

$87 Billion

The Crash of 1929

Between the years of 1925 and 1929 the value of stocks being sold on the New York Stock Exchange had more than tripled.

$27 Billion

1925 1929

GM rose from $268 to $452 per share!!

Causes of the Crash

Dangerous investment practices Speculation Buying on the Margin

False sense of prosperity The “Roaring Twenties” brought unprecedented amounts of prosperity to the United States.

During this period consumers had access to many new products and believed that they could all have the glitz and glamour of the era.

Many spent well beyond there means and then utilized the largely unrestricted credit available to keep on purchasing.

Government policies “Laissez Faire” Lack of business regulation Lack of bank regulation Federal Reserve Policy

The Beginning of the End: Black Thursday

Despite signs in September that a stock market crash may occur, many people continued to invest in the market.

By late October it became clear that the market was getting increasingly dangerous. Professional investors began to pull out of the market which resulted in a decline in prices.

On October 24, 1929 almost 13 MILLION shares of stock were frantically traded.

As stock values plummeted below the amount borrowed to purchase them, brokers demanded that investors repay their loans. When they couldn’t, brokers offered the stocks for sale.

The Bottom Falls Out:Black Tuesday

On October 29, 1929 the stock market collapsed. Over 16 MILLION shares of stock were sold on that day

and by the end of the day many stocks had no value at all! Investors lost over $30 BILLION which was equivalent to:

1/3 of the United States gross domestic product Wages of ALL Americans for that entire year!

The failure of the banks was one of the most devastating results of the stock market crash because it resulted in non-investors losing their savings

October 29, 1929

Black Tuesday

The Causes of the Great Depression

Tariffs and taxes Fordney-McCumber tariff (SUPER HIGH) Mellon Tax

Overproduction Machines increase production Installment buying Durable goods decline

Agricultural slump and surplus Disparity of wealth

Rich got richer and the poor got poorer Who is going to buy the products???

Stock market crash

TTOOAADDSS

Once the Great Depression started it spiraled Once the Great Depression started it spiraled quickly out of control. By the end of 1929 quickly out of control. By the end of 1929

Americans had lost their feelings of optimism Americans had lost their feelings of optimism and a wave of fear had overtaken the and a wave of fear had overtaken the

population.population.

Hoover’s Policies

Main IdeaMain IdeaThe Hoover administration struggled to The Hoover administration struggled to

solve the nation’s economic problems, solve the nation’s economic problems, but failed to create an effective strategy but failed to create an effective strategy

to bring an end to the Great to bring an end to the Great Depression.Depression.

H

The overly optimistic attitude of Hoover did little to help the situation. His predictions that “prosperity was just around the corner” became an insult to the millions of Americans that were out of work.

Hoover’s campaign slogan of “Two cars in every garage” quickly became “two families in every garage” to those that felt he was doing to little to bring an end to the Depression.

It’s okay to be stubborn…unless your wrong!

Hoover was very inflexible in his policies and his administration was widely attacked after the Republicans lost control of the Senate and House in the midterm elections of 1930.

What result does this loss of power have on the remaining years of Hoover’s term?

Domestic Mistakes

Hoover did not veto the Hawley-Smoot Tariff (the largest peacetime tariff in history) even though 1,000 economists wrote to him that it would:1. Help poorly performing producers 2. Raise consumer prices 3. Reduce foreign markets4. Cause ill will toward the US in other countries

Farmer incomes were cut by more than half from 1929 to 1932. Farm board was ineffective in maintaining prices and convincing farms not to overproduce.

No “Soup” For You!

Hoover resisted government “handouts” and supported trickle down economics (help the financial needs of those at the top and the prosperity will trickle down to those on the bottom).

Hoover vetoed all legislation that would have given direct aid to the unemployed; he only approved assistance to corporations, railroads and local/state governments.

Hoover’s Foreign Policies

~Hoover was a pacifist (believed that war was wrong) and was committed to world peace.

~Removed troops from Latin American nations and tried to win their trust. This failed because the Hawley-Smooth tariff hurt their economies and they resented Hoover for approving the tariff.

~Supported disarmament because he opposed war and he wanted to limit military spending to help keep taxes down.

~Hoover supported a one-year “freeze” on German war debt but would not support canceling the debt.

Early Issues in Foreign Affairs

Hoover’s desire to keep peace allowed for Japan to aggressively enter into China and set the stage for “appeasing” Hitler.

Americans supported Hoover’s desire to stay out of Europe because they wanted to focus on issues that were causing problems at home.

The Depression Worsens

Main Idea

As Franklin Roosevelt takes office, the conditions in the United States are steadily worsening. He must decide how to handle the problems that are facing the nation.

THE BIG QUESTION

What is the role of government in the economy?

Problems During the Great Depression

Fear Starvation Wage Cuts and Unemployment Hoovervilles

The Bonus ArmyThe Bonus Army In May 1932 over 1,500 army veterans and their

families marched on Washington, D.C. to demand early payment of their bonuses.

As they protested, more veterans joined the cause. After the Congress denied them their demands, a clash broke out between the vets and the police.

The army was called in and chaos exploded with excessive force being used against the Bonus Army.

Americans blamed Hoover for the incident.

                                                                                                             

The Election of 1932

Roosevelt (D) vs. Hoover (R) Roosevelt supported the repeal of Prohibition and a

“new deal for the American people” Hoover insisted that the depression was not the fault

of his administration and refused to believe that the government should provide handouts to American citizens.

Roosevelt won a HUGE victory (42/48 states) demonstrating that Americans were ready for a new approach to handling the Great Depression.