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