The Stock Market Crash of 1929 & The Depression of the 1930s The 1920s had been a decade of superficial prosperity Some Americans became very wealthy, but many either couldnt afford new goods, or went deep into debt to get them. Many Americans became very rich by playing the stock market. People bought stocks, then sold them once their value had gone up. Many Americans appeared wealthy because they owned so many consumer goods. Banks loaned Americans a lot of money. Many Americans didnt make enough money to be able to pay back their debts. - Main cause of Americas current recession: - Housing crisis - Main cause of the crash of 1929: - Stock crisis Gross Domestic Product: the value of all the goods/services produced by a country in the global market. On October 29 th, 1929, the stock market crashed. When the stock market crashed, people rushed to banks to get all of their money back. The problem: banks had used peoples savings accounts for loans. The money was gone. Countless Americans lost their entire life savings. The Bank run - YouTube The Bank run - YouTube Unemployment rates rose from 3% to 25% GDP declined by nearly 50% By 1933, 11,000 of the nations 25,000 banks had failed About 90,000 businesses went bankrupt Between , the price of a share of US Steel fell from $262 to $22. General Motors from $73 to $8. William C. Durant, one of the founders of General Motors, lost his entire fortune and ended up running a bowling alley in Flint, Michigan. US Steel had employed 225,000 full time employees in By the end of 1932, it had zero full time employees. In Detroit, 4,000 children stood in bread lines each day. Throughout the country, the unemployed demonstrated for jobs and economic relief. Many Americans thought Hoovers response inadequate and insensitive. Hoover strongly opposed Federal intervention in the economy. Hoover thought that depressions were a normal part of capitalism. In 1932, Hoover raised taxes in an attempt to balance the Federal budget. This further reduced Americans purchasing power. By 1932, it seemed clear that the depression would not end on its own. Hoover began to lend money to failing banks and businesses. Hoover refused to offer direct relief to the unemployed. He believed this would do the unemployed a disservice and make them dependent upon the government. In 1932, Franklin D. Roosevelt defeated Herbert Hoover in the Presidential election. FDR promised Americans a New Deal The New Deal was an abundance of Federal programs created to stimulate economic growth and help Americans find employment. In his First 100 days in office, FDR created programs like the: - Civilian Conservation Corps - Agricultural Adjustment Act - National Industrial Recovery Act Roosevelts three Rs: 1. Relief 2. Recovery 3. Reform The New Deal was a social experiment. Could the government intervene to fix a broken economy? The New Deal created many programs that are still around today: Social Security: tax money put aside to fund the retirement of the elderly. FDIC: Federal Deposit Insurance Corporation, the government insures private bank accounts.