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Great Depression
Causes of the Great Depression
• Stock Market Crash- Black Tuesday- October 29, 1929– Stock prices had fallen the Thursday before– The wealthy bought a lot to stabilize– Stock prices continued to fall
Causes of the Great Depression
• Uneven income distribution- wages had not risen that much
• Speculation- people bought stock believing the price would go up and they could sell for a quick profit– “Buying on margin”- people borrowed money to
buy stock making low down payments; when market crashed, people lost everything
Causes of the Great Depression
• Excessive use of credit- also called installment buying; 1920s advertising stimulated consumers’ desire to buy goods
• Overproduction- businesses produced too much and workers did not have high enough wages to buy them
• Weak farm economy- prosperity never reached farmers due to overproduction, high debt, low prices, and drought
Causes of Great Depression
• Government policies- laissez-faire policies did little to regulate these problems; high tariffs hurt farmers and international trade
• Global economic problems- Europe never recovered from WWI; most nations were interdependent in banking and trade
Effects
• Worst in 1932• GNP dropped from $104 billion to $56 billion
in 4 years• Income declined over 50%• 20% of banks closed• $10 million in savings • 25% unemployment
Hoover
• Thought prosperity would return• Did not ask for Congress’ help until summer of
1930• Thought government assistance to individuals
would destroy self-reliance• Thought relief efforts should be state level
Hoover’s Foreign Response
• Hawley-Smoot Tariff- increased tariff to satisfy business owners who thought higher tariffs would protect their businesses– European countries enacted higher tariffs in
responses• Suspended Dawes Plan- plan for US to collect
war debts; Hoover suspended this plan; many bankers withdrew their money
Hoover’s Domestic Response
• Federal Farm Board- created in 1929 but powers were expanded; government held surplus grain and cotton in storage; did not stop surplus
• Reconstruction Finance Corporation- gave out emergency loans to help businesses; thought loans would “trickle down” to help lower classes
• Home Loan Bank Act- gave federal loans to homeowners to prevent foreclosures
Despair and Protest
• Farmers got together to stop banks from foreclosing on farms and evicting them from their homes– Farm Holiday Association- stopped entire crop of grain to
keep it from reaching market• Bonus March- thousands of unemployed WWI vets
to demand bonus payments they were promised at a later date (1945)– Bill failed to pass– 2 veterans killed– Hoover ordered army to break up march/camp– Many thought Hoover was uncaring
Election of 1932
• FDR nominated for Democrats– Promised a “new deal”
• FDR wins in a landslide• Hoover became a “lame duck”– 20th amendment shortened period between
election and inauguration