Crash and Depression (1929-1933)

I. The Stock Market Crash

• October 29, 1929

• The era of “wonderful prosperity” had come to an abrupt end as the New York Stock Exchange tumbled

A. The Market Crashes

• The Dow Jones Industrial Average (an average of stock prices of major industries) was at an all-time high on Sept. 3, 1929

• The stock prices were extremely inflated due to consumer confidence

• The stock prices dominated the news

1. Black Thursday

• October 23, 1929- stock prices fell greatly, but banking leaders warned the public not to worry– “A country as rich as the U.S. can withstand the shock

of a $3 billion paper loss on the Stock Exchange in a single day”

• President Hoover said the nation’s business was sound and ready to prosper

2. Black Tuesday

• October 29, 1929 ****

• Known as the “Great Crash”/ “Black Tuesday”

• Investors all over the country raced to get their money out of the stock market– A record 16.4 million shares were sold

• The stock market would continue to fall and by November 13, there had been $30 billion lost

B. The Ripple Effect of the Crash

• Initially the effects of the crash were only felt by investors

• Soon after, millions of Americans who never owned stock were effected

Reasons for the Ripple Effect• Risky loans hurt banks

• Consumer borrowing (banks called in their loans and customers didn’t have $ to pay)

• Bank Runs

• Bank Failures**** (more than 5,500 in 3 years)

• Savings wiped out

• Cuts in production

• Rise in unemployment

• Further cuts in production

1. Economic Contraction• Contraction=shrinking

• Depression- particularly long and severe contraction

• The Great Depression- the most severe economic downturn in the nation’s history– Some historians say that the depression only lasted into

the 30’s after FDR’s New Deal improves our economy– Most historians say the depression lasted until WWII

when the war spending helped bring us out of it

2. Impact on Workers and Farmers• With no money and little incentive (reason) to

produce, factories throughout the country began to close– Aug. 1931- Henry Ford closed his Detroit factories

which put 75,000 people out of a job

• Farm prices, already low, continued to fall

• By 1932, more than 1/4 of the nation’s adult population was unemployed

3. Impact on the World• Nations depended on each other for trade,

international bank loans, etc.

• Congress put high tariffs on foreign countries trying to protect American jobs and instead made it so the other countries couldn’t pay back their war debts because they couldn’t trade

• Other countries soon followed into Depression- especially after U.S. banks were unable to loan $ to Germany to help pay reparations

C. Underlying Causes of the Depression

• The stock market crash on 1929 DID NOT cause the Great Depression

• Both the crash and depression were a result of deep underlying economic problems:– An unstable economy- uneven prosperity, no savings, etc– Overspeculation- Stock boom was based on borrowed $

and optimism instead of real value– Government Policies- Mistakes by the Federal Reserve as

well as Laissez-faire leaders

II. Social Effects of the Depression

• Many Americans thought the Great Depression would not last

• However, hard times continued and eventually spread to all levels of society

A. Poverty Spreads

• Even professionals and white-collar workers lost jobs, had their $ lost when a bank closed, etc.

• People from all levels of society could be effected by the Great Depression

1. “Hoovervilles”• The hardest hit were the poor

• Many became homeless and moved into “shanty towns” that were called “Hoovervilles”– The name was mocking the President (Herbert Hoover)

whom people blamed for not resolving the crisis

• People would live in cardboard boxes, rusted-out car bodies, wooden crates, etc.

2. Farm Distresses• Low crop prices cut farm family incomes

• Could not pay their mortgages so they lost their farms to the banks, which sold them at auction

• Some protests shocked the nation such as when farmers dumped thousands of gallons of milk and destroyed crops to protest low prices

3. The Dust Bowl• Between 1931-1940, so much soil blew out of the

central and southern Great Plains that the region became known as the Dust Bowl

• This was a major crisis as dust storms created by severe drought and farming practices carried away soil and deposited it far east leaving farmers without nutrient-rich soil to farm– About 100,000 farmers were forced to migrate to

California

B. Poverty Strains Society

• Unemployment and the fear of losing a job caused great anxiety– Suicide rates went up– Some people starved or were suffering from

malnutrition– Families would line up by the garbage cans of

restaurants waiting for scraps of food

1. Stresses on Families

• People had to live in crowded conditions

• People gave up even small pleasures such as ice cream and going to the movies

• Married women were often not allowed to work because they were accused of taking a man’s job

2. Discrimination Increases• White-Americans now needed a job (any job) and

demanded the low-paying jobs occupied by blacks, Hispanics, or Asian-Americans

• The courts often didn’t uphold minority rights

• Lynchings increased

III. Surviving the Great Depression

• Most Americans tried to pull together to help one another out.

• Penny Auctions- when a farmer would have his farm foreclosed and put up for auction, his neighbors would wager only pennies to win and give the farm back to the original owner– Very successful- some states suspended

foreclosures on farms

1. Young People Ride the Rail• Teenagers would leave their families and look for

jobs or adventure by hopping illegally on to rail road cars

• Some left because their family couldn’t afford them, others to get away from despair

• They were called “hobos” and faced being arrested, injured, or even shot by angry farmers for taking food

2. Seeking Political Solutions

• Radical ideas gained some popularity due to the harsh times

• For example, the Socialist presidential candidate received almost 900,000 votes in the 1932 election

3. Depression Humor• Used to get through their troubles

• Hoovervilles- shanty towns for the homeless

• Hoover blankets- newspapers used as blankets

• Hoover flags- pockets turned inside out with nothing in them

• Babe Ruth asked for a salary higher than President Hoover and joked, “I had a better year than he did.”

A. Signs of Change

• Prohibition is repealed - the 21st Amendment– In 1933, ended the “failed social experiment” and cut

down on gangsters who profited from selling alcohol illegally

• The Empire State Building- offered a dramatic symbol of hope– Was the world’s tallest building (102-story building)

1. The End of an Era

• Al Capone was arrested

• Babe Ruth retired

• Henry Ford lost his popularity

• Charles Lindbergh’s baby was kidnapped and murdered which symbolized his fall from a national hero and shook the nation

IV. The Election of 1932• President Hoover tried to “engineer” a way to get

the U.S. out of the Depression, but his strict adherence to his political beliefs greatly limited any accomplishments– He believed in Laissez-faire

• Herbert Hoover (R) vs. Franklin D. Roosevelt (D)

A. Hoover’s Limited Strategy

• Hoover believed confidence is all that the economy was lacking

• He insisted that his administration and business leaders maintain public confidence and he believed the economic conditions would turn around soon

1. Voluntary Action Fails• Hoover believed voluntary controls by businesses in

the U.S. were the best way to end the economic crisis

• Held a meeting with the top business leaders– Promised to keep worker’s wages up voluntarily

• Didn’t work as companies were forced to cut wages

• Hoover and the Republicans were soon blamed for not taking any action

2. The Government Acts• Despite common beliefs, Hoover did try to act

– His policies were just not strong enough or not the correct policy

• Helped create some jobs by constructing the Boulder Dam (later named the Hoover Dam)

• Hawley-Smoot Tariff - tried to protect domestic (American) industries with the largest import tax in U.S. history– A complete backfire… European nations also raised their

tariffs and international trade diminished greatly

3. Hoover’s Unpopularity Grows• Hoover insisted state and local governments should

should handle relief

• His refusal to provide direct aid brought a bitter public reaction and negative publicity– He was blamed, sometimes unfairly, for everyone’s

problems

• Side-note-- John Maynard Keynes (economist) argued that massive government spending could turn around the slumping economy

4. Veterans March on Washington• Low point for President Hoover (1932 summer)

• 20,000 jobless WWI veterans and their families encamped in Washington, D.C.– Called themselves the Bonus Army– Wanted payment of a pension that had been promised for

1945

• The Bonus Army faced their own country’s guns, tanks, and tear gas– This lasting image helps defeat Hoover in the election

B. A “New Deal” for America• “I pledge myself to a new deal for the American

people,” pledged Franklin Delano Roosevelt (FDR)

• FDR- married to Eleanor (a very influential 1st lady who happened to be the niece of Teddy)– Graduated from Harvard– Worked in a law firm, the NY Senate, and as Assistant

Secretary of the Navy– Came down with polio in the 1920’s and could never

walk again without help– Planned to change the role of the Federal Government

C. The Election of 1932• The campaign was “more than a campaign between

2 men, it was a campaign between 2 philosophies of government”

• This election would prove to change the American government forever

• FDR won the presidency by a huge margin– People wanted out of the Great Depression and FDR

provided hope and action