The Beginning of the Great Depression in America

1920's had been a period of good economic times Tues. Oct. 29th, 1929 - NYC Stock market

crashed, causing a depression that would last until 1942

Industries in Trouble Some industries (textiles, steel, &

railroads) barely made a profit due to foreign competition and new types of transportation

WW I wartime needs were no longer in demand

Boom industries of the 20’s (autos, construction, & consumer goods) began to weaken

The housing industry began to decline which affected other industries such as building materials, appliances, new furnishing, etc.

Mechanization of Industry – machines doing jobs of workers – more goods – less jobs

in 1920's U.S. Economy was based on the productivity – purchasing power - employment cycle

for many goods to be produced , purchasing demand had to be there: this resulted in high employment and a healthy economy

between 1924-27, U.S. productive capacity doubled but it was due to technological innovation electricity and mechanical advances made for better production, but no new jobs were added to the economy

so more consumer goods were available, but there weren't enough people to buy them (OVERPRODUCTION)

Farmers During WW I farmers planted more crops & took

out loans to buy land & equipment After WW I agriculture suffered in the 1920’s

since there was now a lack of international demand for food crops and prices dropped by 50%.

To compensate, farmers boosted production which cause the prices to further drop

Farmers who went into debt lost their farms and had their property seized.

Many rural banks, who had loaned $$ to farmers, began to fail

Although Congress twice passed a bill which would called for federal price support, President Coolidge vetoed it commenting, “Farmers have never made money. I don’t believe we can do much about it.”

Consumers living on credit

By the late 1920’s Americans were buying less due to rising prices, stagnant wages, uneven distribution of income and too much credit

Production of goods expanded much faster than wages

People began living beyond their means, often buying goods on credit

Businesses encouraged consumers to pile up debt which people found difficult to pay off

Faced with debt, people began to buy less

Uneven Distribution of IncomeUneven Distribution of Income 1929, the wealthiest 5% of

American families took in nearly a third of the nation’s income

The poorest 40% of the population earned just over a tenth of the national income

this middle class depended on their salaries and when productivity declined they lost their jobs

and because of low savings, they had to cut back on their purchases

this decline in consumption among the middle class ruined the whole country

The stock market: the public invests in

cos. by purchasing stocks; in return for this they expect a profit

because of the 1920’s booming economy, money was plentiful, so banks were quick to make loans to investors

investors only had to pay for 10% of the stock's actual value at time of purchase› this was known as

BUYING ON MARGIN, and the balance was paid at a later date

this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck

Due to this buying & selling, stock value increased (Ex: G.E stock $130 $396/share)

this quick turnover didn't aid companies. they needed long term investments so they could pay bills (stock value was like an illusion)

unscrupulous traders would buy and sell shares intentionally to inflate a given co.'s stock value

all of this gave a false sense of security/confidence in the American market

Black Tuesday Black Tuesday (10/29/1929)(10/29/1929)

beginning in Oct. 1929, investors’ confidence dropped, leading to a market collapse

all tried to sell at once and the bottom fell out of market = panic selling… (many bankruptcies as banks called in loans)

only a tiny minority of people traded on the stock exchange, but they possessed vast wealth, and the crash had a ripple effect on the economy

Financial Collapse – Run on Banks

Panic!! People rushed to withdraw their money from banks

Banks could not cover the withdrawals since banks had also invested and lost money in the stock market

1929 – 659 banks closed 1933 – around 6,000 banks, ¼ of the

nations banks had failed The federal gov’t did not protect or

insure bank accounts at this time

Businesses fail- people suffer 1929 - 1932

85,000 businesses went bankrupt Workers lost jobs Unemployment went from 3% in

1929 to 25% by 1933 One out of every 4 workers did not

have a job Those who had jobs often had to

accept pay cuts and reduced hours

One of the lucky ones In the months before the

crash, shrewd stock market speculators began to unload their stocks and take profits

Joseph P. Kennedy, father of John F. Kennedy, sold early and did very well.

It is said that he knew it was time to get out of the market when he received stock tips from a shoe-shine boy.

Worldwide shock waves Europe also suffered during this

period European countries faced high debt

payments from the war to the US Germany had to pay war reparation

after being defeated Trade between Europe and the US

suffered To encourage European nations to

buy US goods, Hoover proposed a MORATORIUM - a temporary postponement of debt and war reparation payments

Before this happened Euro. countries went off the gold standard which decreased the value of the payments they did make to the US

European banks defaulted on payments to US banks

TARIFF WARS

In 1930 Congress passed a high tariff (SMOOT HAWLEY) to protect U.S. industry (hoped to stimulate purchasing of U.S. goods)

this turned out to be a fatal error...

Congress did not understand that the world had become a GLOBAL ECONOMY

in retaliation other countries passed high tariffs and no foreign markets purchased American goods, so U.S. productivity decreased again

Herbert HooverPresident 1928 – 1932 Republican

“business is on a sound and prosperous basis” 10-25-1929

“Any lack of confidence in the economic future…is foolish” 11-29 Hoover

Know as “the Great Engineer”

Never held an elected office

Born poor – succeeded with brains and hard work

Great humanitarian Rugged Individualism -

belief that individuals and private agencies should care for the nations poor, sick, etc.

Feared government handouts would weaken people’s self respect

Unprepared to deal with the depression

Blamed by many for the depression

Hoover – unable to deal with the depression

Tried to restore confidence

Made it easier to borrow money

Began a public works program

Did not believe in providing direct relief

Banks closed and people lost their money

Unemployment skyrocketed

Homeless people called newspapers – Hoover blankets and a turn out empty pocket a Hoover flag

As people lost their jobs and homes they lived in shacks which they called Hoovervilles

Cardboard shack

Farmers retaliate

Overproduction during WW I caused farm prices to dropped

Farmers dumped milk and burned crops in an attempt to raise farm prices

Used force to try to stop foreclosures

If you refused to leave your farm, it could be tractored - torn down On the left, Mrs. Wilson’s

grandfather, an Illinois farmer dumping milk. 1932

Hoovervilles

Hoover takes action - finally He gradually softened his position on gov’t

intervention By 1930 he directed federal funds into

projects such as the construction of Boulder Dam to jump-start the economy and add jobs

Federal Farm Board was designed to help raise crop prices

Glass-Steagall Banking Act increased bank reserves and made bank loans easier to get

Federal Home Loan Bank Act lower mortgage rates and allowed refinancing to avoid foreclosure

Reconstruction Finance Corporation provided emergency financing to banks, life insurance companies, railroads and other large businesses

Too little – too late

Hoover believed the money would trickle down to the average citizen through job growth and higher wages

Critics believed it only helped corporations

The poor still needed direct relief Hungry people could not wait for

money to trickle down to their tables

Hoover and the Bonus Army World War I veterans had been promised a

cash bonus payable in 1945, since 1931, they had been allowed to borrow money on the payment

They came to Washington D.C. in 1932 to support a bill that would pay them the bonus now

The bill did not pass and when the Bonus Army and their families refused to leave the shantytown they were living in, Hoover took drastic measures

The army, led by Douglas MacArthur and his aide, Dwight Eisenhower, gassed and drove the veterans from Washington D.C.

Americans were stunned & outraged at the gov’t’s treatment of veterans

Big trouble when the gov’t attacks it’s own citizens

An 11 month old baby diedAn 8 yr. old was blinded

1932 ELECTION

1 out of 4 was unemployed…

nat'l income was 50% of what it had been in 1929

Republicans nominated Hoover no hope

winner by a landslide = FRANKLIN DELANO ROOSEVELT (Dem - N.Y. governor)

Franklin D. RooseveltPresident 1932 – 1944 Democrat

“We have nothing to fear but fear itself” FDR

Married Eleanor Roosevelt, niece of Teddy Roosevelt

Stricken with polio in 1921 – paralyzed the rest of his life

Many believed his political career was over

1928 elected governor of New York

Elected president in 1932 Promised the American

people a “New Deal” First Act – declaring a bank

holiday Used the “fireside chat” to

keep the public informed Government engaged in

massive spending projects to improve the economy

Elected for 4 terms as president

Eleanor and FranklinShe will become his legs often traveling and speaking on his behalf

Shantytowns sprung upwhen people lost theirhomes. Later they willbe called Hoovervilles.

Hardship & Suffering

The Unemployed in cities – marching, hanging around, waiting in a soup kitchen line

African and Latino Americans

Unemployment rates were even higher and wages lower

Racial violence occurred 24 African Americans were lynched

in 1933 Latinos in the southwest were also

targets Unemployed whites demanded

that Latinos be deported Thousands returned to Mexico

Mexican woman and Black farm family

Rural Areas - Losing your property

One advantage – food, that is until you lose your farm.Farmers who lost their farms became tenant farmers & barely managed. Many left and moved west.

The Dust Bowl – drought and over production of the land

Oakies - Looking for a better life in California Followed Route 66 to California

The automobile was very important

Men in the streets looking for work

Riding the rails

2 million men left their families and wandered the country

The federal gov’t did not provide Direct Relief to the poor

Some cities and charities did provide some relief

In New York, the weekly payment was $2.39 per family

Well below what a family needed

Women & children

Social and Psychological effects

People were demoralized Suicide rate went up by 30% More people were admitted to mental

hospitals People stopped going to the doctor & dentist Dreams of college, marriage, raising families

were put on hold Families helped each other & showed

kindness to strangers People developed habits of saving and

thriftiness

The Ugly Facts 85,000 businesses failed 6,000 banks closed 400,000 farms were lost because payments

could not be made 12,000,000 people were out of work 13% of working women were the only source

of income for the family By 1932, between 1 and 2 million Americans

were homeless At least 25,000 families were nomadic,

looking for work Malnutrition cases rose from 18% to 60% by

1931 5,000 schools closed due to lack of funds $12.00 – the monthly Red Cross relief

payment