Bell Ringer How can you tell that we have been in a recession/depression since 2008?

Bell Ringer

• How can you tell that we have been in a recession/depression since 2008?

The Great DepressionChapter 14

Causes of the Depression

• When the 1928 election came around, the candidates ran on platforms of good times• Hoover (Rep.) had been Sec. of Commerce for last

8 years• Alfred E. Smith (Dem.) was the first Catholic to be

nominated for president• Smith’s religion was one cause for his loss, the other was

that Republicans took credit for the prosperity of the 1920s

• Hoover won the Electoral College 444-87• He said “I have no fears for the future of our

country. It is bright with hope.”


• The stock market had been developed as a system for buying and selling shares of companies

• When stocks are on a long rising period, the market is called a bull market• This encouraged many people to buy

stocks in the late 1920s, by 1929 10% of households owned stock


• People began buying stocks on margin—they made small down payments, and got a loan for the rest from a broker who made a commission on the stock and money off the loan

• As long as prices were raising buying on margin was safe, if prices fall, then a broker would issue a margin call—meaning all loans had to be paid immediately

• In the early 1920s price of stock was based on profit and future prospects, in the late 1920s people began buying stock regardless of earnings leading to a false increase in the price of the stock• They were buying on speculation—taking risks on stocks

thinking the market would continue going up—then selling high


• The bull market will only last as long as investors keep putting new money into it, by Sept. 1929, investors began sensing trouble and started selling stocks

• On Monday, Oct. 21 Groucho Marx, as well as many other Americans got calls from their brokers calling margins• By Oct. 24 (Black Thursday) Marx had made a

small fortune in films and plays, was now broke, like most other Americans

• On Oct. 29 (Black Tuesday) stock feel $10-15B in just one day

• By Nov. $30B was lost


• The stock market crash was NOT the major cause of the Great Depression, it just undermined the economy’s ability to hold out against other weaknesses

• The banks weakened because of two things• People had borrowed money to buy stocks, yet

when the market crashed, they had no way pay them back

• Second, the bank had taken money and invested in the market in attempts to get higher returns, when the market crashed, they lost most money


• The banks limited credit at this point, limiting what people could buy, the recession began there

• When banks started failing, people lost savings, triggering lack of confidence in back which led to people withdrawing all money from bank

• During the first two years of the Depression, more than 10% of all banks closed


• If other forces had not been in place, the market crash would not have been a depression

• The key cause of the Depression was overproduction—too many goods for people to buy

• 30% of the nations income was made by 5% of American households

• 2/3 of Americans made $2500 or less, leaving little discretionary income


• Because so many had bought goods on installment debt, they had to pay those loans instead of buying other goods

• Because retail began to slump due to lack of buying items like radios, people began losing their jobs (MT copper miners, MN lumberjacks, OH glassworkers)

• This chain reaction put more and more Americans out of work


• Jobs would not have been lost if more had been sold abroad, but this was not happening, especially after the Hawley-Smoot Tariff—increased tariffs to the highest point ever, trying to protect American manufacturers, instead hurt them

• Typically to curb excessive speculation, the Federal Reserve would raise interest rates, during the 1920s the Fed kept it low


• The Fed. Reserve Board helped cause the Depression in two ways• With low interest rates, banks were willing to take

on riskier loans• Low interest rates indicate to business leaders

that the economy is expanding

• Companies borrowed to expand production leading to overproduction of goods while sales were falling

• When the Fed raised interest rates it was too late, leading to a tightening of credit which continued the downward spiral

Bell Ringer

• What were the causes of the Great Depression?• Go into detail explaining how each one

was a cause

Life During the Depression

• By 1933 nearly ¼ of the workforce were unemployed

• Many people lined up in bread lines and went to soup kitchens to get food

• Many lost their homes, some refused to move, which lead to bailiffs (court officials) throwing the people out with their belongings onto the street

• Shantytowns were shacks set up on public lands by homeless, they were often called Hoovervilles (named after the president)

• Some became hoboes, riding the rails to new places looking for a better life


• Farmers had another problem• Many farmers had dug up the wild grass in

the Midwest, leading to a lack of moisture in the soil

• When a drought hit the area, it caused dust storms that had dust falling like snow, piling over everything

• This area stretched from the Dakotas to Texas

• Many “Okies” moved to CA where they lived in roadside camps


• Entertainment kept many people sane during these trying times• Movies allowed people to escape for an hour or

two• Many would listen to their radios

• Groucho Marx and his brothers were in Animal Crackers

• Moviegoers loved cartoons, including Snow White and the Seven Dwarfs, the first full-length animated film

• Other movies of this time were The Wizard of Oz, Mr. Smith Goes to Washington, and Gone with the Wind


• For radio shows you had comedians such as Jack Benny and George Burns and superheroes like the Green Hornet

• The Lone Ranger was the typical western with his “faithful Indian companion” Tonto

• The Guiding Light was a day to day store about middle-class families who deal with problems, became known as soap operas since the sponsors for these shows were typically makers of laundry soap


• Grant Wood’s painting American Gothic

• John Steinbeck wrote the Grapes of Wrath

• Famous writers of this time include William Faulkner and Margaret Bourke-White’s

• Dorothea Lange took pictures that captured the desperation of the 1930s

Hoover Dam

• Started as a public works project under Hoover

• The town of Boulder City, NV was built to accommodate all the new employees that worked on the dam

• Today the dam generates 4 billion kW of electricity• 25% to NV• 19% to AZ• 56% to CA

Hoover Responds

• Hoover remained optimistic even into March 1930 saying that the worst would pass within 60 days

• Despite this, he was worried, he brought the heads of banks, RRs, and big business together to find solutions• Many business would not stick to promises made

• Hoover knew we needed to increase public works—government financed building projects

Hoover Responds

• Hoover increased public works and urged local and states governments to do the same, but this only made up for a small percent of jobs lost in the private sector

• Hoover knew he would have to massively increase government spending in order to create enough jobs to make a difference—he refused• The reason was he knew the money had to come

from somewhere, either taxes, which would hurt people, or loans from banks

• Loans to the government would take away from money available to companies and individuals who needed loans, thus he feared it would slow economic recovery

Hoover Responds

• After asking the Fed Reserve to put more money into circulation (they refused), he comes up with the National Credit Corporation who pools money together from NY banks, to allow banks in trouble to stay open

• The Reconstruction Finance Corporation was set up by the government to give Federal loans to banks, RRs and agricultural institutions-it was too caution, thus not providing significant amounts

Hoover Responds

• Hoover was against federal relief, he felt it should come from state and local

• By `32 he realized that he needed to do something though, he signed the Emergency Relief and Construction Act• Handed out 1.5B in public works and 300m

in loans to states for direct relief• This did not stop the accelerating collapse

Hoover Responds

• People began hunger marches in areas like OK and Washington, D.C.

• Farmers began destroying crops in order to increase the price by decreasing demand

• After WWI, Congress set up a $1000 bonus for military personnel to be paid in 1945• TX Congressman introduced a bill to give the

money to them early• The Veterans took up marching along the

highways, the media called them Bonus Army• This would end with the with the Senate voting

the bill down and Veterans crowding into D.C. only to be sent out by military force

Hoover Responds

• Hoover did not end the Depression• He did more to expand the economic role of

the federal government• The images of his Reconstruction Finance

Corporation, or other attempts are not how he is remembered during the 1932 election

• Voters see him as the President who caused the death of Veterans who were protesting and the reason the Depression was still affecting citizens

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Bell Ringer How can you tell that we have been in a recession/depression since 2008?