Chapter 14The Great Depression Begins

I. The Nation’s Sick Economy

A. Economic Troubles on the Horizon1. The prosperity of the 1920s was superficial. (only on the surface)2. Many key industries were barely making a profit. (textiles, steel, railroads, mining)

3. More importantly, there was a slump in leading economic indicators:a. automobile sales and production.

4. When any of these industries declined, it led to unemployment.

b. new housing construction.c. a decline in the sale of consumer goods. (furniture, appliances etc)

5. The industry hardest hit in the 1920s was agriculture.

6. World War I had created an increased demand and higher prices for wheat and corn.

7. US farmers planted more crops and borrowed money to buy equipment and more land.

8. After WWI, the demand decreased and crop prices fell by 50 percent.

9. Many rural farmers lost their farms when banks foreclosed on defaulted loans.10. American consumers as a whole began buying less in the late 1920s because prices of consumers goods were rising faster than wages.11. Many Americans bought consumer goods on credit and piled up large debts that they were unable to pay off.

12. In the election of 1928 Republican Herbert Hoover ran against Democrat Alfred E. Smith.13. Hoover won by a wide margin largely because of the prosperity of the 1920s under Republican leadership.B. The Stock Market Comes Tumbling Down.1. Through most of the 1920s, there was a bull market-a period of rising stock prices.

2. Many Americans rushed to buy stock to see if they could strike it rich.3. Most investors engaged in speculation-buying stocks and bonds and hoping to make a large profit.4. Most investors were buying on margin-paying only a small portion of the stock’s price and borrowing the rest from a broker.

5. On October 29, 1929, known as Black Tuesday, the bottom fell out of the stock market.

a. stock prices fell and people rushed to sell their shares before it dropped more.b. Investors lost huge sums of money as over 16 million shares were dumped for a loss or could not be sold.c. by mid-November over $30 billion had been lost in the markets.

6. The stock market crash was the start of the Great Depression-a period from 1929 to1941 in which the economy was in severe decline and millions of people were unemployed.7. The stock market continued to drop until 1932.

C. Financial Collapse1. Many Americans rushed to banks to withdraw their savings.2. Most banks had invested depositor’s money and could not repay all of the withdrawals.

3. By 1933 over 6,000 banks were forced to close because they could not repay their depositors.

4. Over 9 million people lost all of their savings.

5. Between 1929 and 1932 the nation’s gross national product-the nation’s total output of goods and services-dropped from $104 billion to $59 billion.6. Over 85,000 businesses went bankrupt.

7. Unemployment went from 1.6 million workers to 13 million (25 percent of the work force).

II. Hardship and Suffering During the Depression

A. The Depression Devastates People’s Lives.

1. In many cities across the US, people who became unemployed were no longer able to pay their rent or mortgage.2. Many people were evicted and ended up living in the streets.

3. Shantytowns consisting mainly of shacks sprang up on the outskirts of many cities.4. Soup kitchens and bread lines were created to provide food for the urban poor.

5. In rural America, about 400,000 farms were lost to foreclosures.

6. In addition to the Great Depression, the US was hit by a severe drought that began in the early 1930s.a. in the 1920s farmers on the Great Plains from Texas to North Dakota broke out pasture land into cultivated farmland.b. when the drought struck, this region turned in the Dust Bowl as millions of tons of dust was blown away by strong winds

B. Effects on the American Family1. During the Great Depression, almost two million men wandered the country as hoboes-hitching rides on trains and sleeping under bridges.2. Some men could not cope with their unemployment and abandoned their families.

3. There was no system of direct relief that could provide aid to the poor.

4. Many women starved to death because they could not find work and were too proud to stand in bread lines.5. Children suffered from malnutrition and rickets because of poor diets.6. Over 2,600 schools shut down nationwide because of lack of funding and many children were forced to work in sweatshops.

III. Hoover Struggles with the DepressionA. Hoover’s Philosophy of Government1. Hoover believed that the government should cooperate with business not control it.

2. He also believed that people should succeed through their own efforts without depending on the government to bail them out.

3. Hoover opposed any form of direct federal welfare or direct relief to the needy.

4. He felt that individuals or local organizations should provide aid to the poor.

B. Hoover Takes Action.1. Hoover directed that

federal funds be used in projects designed to provide jobs to bolster the economy.

2. Hoover’s main public-works project was a program to build roads, dams and bridges.

3. Boulder Dam was built on the Colorado River between Arizona and Nevada. (is now called Hoover Dam)4. Other Programs by Hoover:a. Federal Home Loan Act-lowered mortgage rates

5. In 1932 about 20,000 World War I veterans went to Washington D.C. to support a bill that would pay them a bonus for service in WWI.a. The veterans built a shantytown near the capitol building to live in while the bill was being debated.

b. Reconstruction Finance Corporation-provide emergency financing to banks and other large companies

b. The bill was voted down in the Senate and most of the veterans left.

d. Hoover was afraid that the group would become violent and ordered the army to remove them.

c. About 2,000 veterans refused to leave and requested to meet with President Hoover.

e. About 1,000 soldiers used bayonets and tear gas to force the veterans to leave and then set fire to the shanties.

g. The American public was outraged and Hoover’s image plummeted.

f. an eight year old boy was blinded and an 11 month old baby died from the tear gas and two people were shot.