1. What happened in Wall Street in Oct 29th. 1929

2. WHY DID THE WALL STREET CRASH HAPPEN? – BECAUSE OF WEAKNESSES IN THE 1920’s ECONOMY (a) Market Saturation and Tariff Barriers (b) Unequal distribution of income (c) Blind faith in the Bull Market driving up stock prices (d) Lack of government regulation meant Banks were able to speculate speculating with deposits

3. WHY DID THE GREAT DEPRESSION AFTER 1929 HAPPEN? The roots of the Depression lay in the 1920’s (a) Farming was already Depressed in the 1920’s – Why? (b) Workers in older industries were poor – Why? (b) Market saturation meant Unemployment was rising after 1928 as profits started to fall

The Depression was caused by the Wall Street Crash (a) It destroyed the Banking system – so business (b) It wiped out savings and confidence The Depression was caused by the policies of President Hoover (a) Rugged individualism / self help (b) Smoot Hawley Tariff (c) Failure of the RFC

The ONE potential essay questions that could be asked in Paper 1 on the Crash and Depression Why did the Great Depression happen? Case A – Weaknesses in the 1920’s economy Case B –The impact of the Wall Street Crash

Case C – The policies of President Hoover

THE GREAT CRASH and THE GREAT CRASH and THE GREAT DEPRESSIONTHE GREAT DEPRESSION

What you need to

know on this topic

Tues. Oct. 29th, 1929 - NYC Stock market crashed. A few prominent investors sold up because they could see that share prices did not reflect the REAL VALUE of many businesses. Everyone else followed suit in a panic of selling. Millions were wiped off the value of shares at a stroke

THE WALL STREET CRASH – OCTOBER 1929

Many of those whohad sharesfound thatthey wereworth only a fractionof what they hadpaid for Them.

DID THE CRASH HELP CAUSE THE GREAT DEPRESSION?

Millions of shareholders were ruined. They had borrowed money to buy their stock “on margin” hoping to pay the loan back when prices rose. Now they had to find the money to pay off their creditor – banks / credit companies - so had to

sell what they had – cars or houses at knock down prices to anyone able to buy!! – not many

As the small shareholders went to their banks to get money from their savings to pay off their creditors – they found the banksshut – BANKRUPT – BUST – why?

YES - Shareholders were ruined

YES - It destroyed the Banking system

Many Banks had speculated with depositors money too in the Stock Market and lost it because of the Crash. Too many were did not

have enough funds behind them – The Federal Reserve had not bothered to make sure of this in the laissez faire 1920’s

AND THIS BANKING COLLAPSE CAUSED MASS UNEMPLOYMENT….

# Thousands of Banks collapsed because of the Great Crash.

# People had no money to deposit in banks – and those who did have money held on to it – putting it into a bank was risky!

# Banks ran out of money – many of them had played the market!

# So businesses could not get loans / financial services to keep going during the Depression – thousands of bankruptcies resulted

ESPECIALLY IN THE TOWNS and CITIES

The Great Depression brought hardship, homelessness, and hunger to millions across the country, people lost their jobs,

andtheir homes.Some built makeshifts shacks out of scrap material. Before long whole shantytowns (sometimes called Hoovervilles in mock reference to the President ) sprung up

One of the common features of urban areas during the era were soup kitchens and bread lines. Soup kitchens and Bread lines offered free or low-cost food for people

FARMERS COULD NOT SELL FOOD – PEOPLE HAD NO MONEY TO BUY

Between 1929-1932 almost ½ million farmers lost their land

# The Bank failures across the country meant thousands of farmers

LOST the SAVINGS they had.

# Their INCOME COLLAPSED for lack of demand for food.

#Many farmers had RUN up DEBTS in the 1920’s – the few banks in

existence in rural areas called these loans in – bankrupting the

farmer

BUT MANY FARMERS FACED OTHER PROBLEMS NOT TO DO WITH THE CRASH

BUT IN THE COUNTRYSIDE AS WELL

BUT MANY FARMERS FACED OTHER PROBLEMS NOT TO DO WITH THE CRASH

Kansas Farmer, 1933 A severe drought gripped the Great Plains in the early1930sWind scattered the topsoil, exposing sand and gritThe resulting dust traveled hundreds of miles. One storm in 1934 picked up millions of tons of dust

from the Plains an carried it to the East Coast.

Many “OAKIES” left and headed for

CALIFORNIA

THE HOBOES

THE UNEMPLOYED “RODE THE RAILS” ACROSSTHE COUNTRY LOOKING FOR A JOB

300,000 transients – or hoboes – hitched rides around the country

on trains and slept under bridges (thousands were teenagers)

Injuries and death was common on railroad property; over 50,000 people were hurt or killed

They used to tell me I was building a dream, and so I followed the mob,

› When there was earth to plow, or guns to bear, I was always there right on the job.

› They used to tell me I was building a dream, with peace and glory ahead, › Why should I be standing in line, just waiting for bread?

› Once I built a railroad, I made it run, made it race against time. › Once I built a railroad; now it's done. Brother, can you spare a dime? › Once I built a tower, up to the sun, brick, and rivet, and lime; › Once I built a tower, now it's done. Brother, can you spare a dime?

Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum!

› Say, don't you remember, they called me Al; it was Al all the time. › Why don't you remember, I'm your pal? Buddy, can you spare a dime?

Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum!

› Say, don't you remember, they called me Al; it was Al all the time. › Say, don't you remember, I'm your pal? Buddy, can you spare a dime?

DID THE ACTIONS OF PRESIDENT HOOVER CAUSE THE GREAT DEPRESSION?

Republican Herbert Hoover ran against Democrat Alfred E. Smithin the 1928 election Hoover emphasized years of prosperity under Republican administrations. He won an overwhelming victory

After the stock market crash, President Hoover tried to reassure Americans. He said, “Any lack of confidence in the economic future . . . Is foolish”. Herecommended business as usual

Hoover was not quick to react to the depression. He believed in what he believed was the very Americanidea of “rugged individualism” – that people succeed through their own efforts and should take care of themselves, and not depend on governmental hand-outs. SELF HELP and looking afteryour own problems were the key to being a “real”American – NOT RELYING ON THE GOVERNMENT

HOOVER’S PHILOSOPHY – RUGGED INDIVIDUALISM

DID THE ACTIONS OF PRESIDENT HOOVER CAUSE THE GREAT DEPRESSION?

YES – His beliefs in Rugged Individualism prevented him from taking effective action

# Hoover did not want to take governmentaction – HE THOUGHT THEECONOMY WOULD SORT ITSELF - he met

# Hoover HATED the idea of FEDERAL government welfare for the poor – private charities did more than the Federal government. Hoover tried to get State

governmentsto help with welfare payments

with industrialists like Henry Ford and tried to PERSUDE them VOLUNTARILY not to cut workers wages or lay more off – he was IGNORED

But most States had no money because they were unemployed

so could not pay tax – HOOVER DID LITTLE TO PUT SPENDING

POWER INTO THE POCKETS OF ORDINARY AMERICANS

 

YES – In 1930 Hoover Increased

Tariffs on foreign imports

: Smoot-HawleyThe U.S. was not the only country gripped by the Great Depression. In 1930, Congress passed the toughest tariff in U.S. history the Smoot – Hawley Tariff. It increased the tariffs by 40% - way beyond Fordney McCumber. It was meant to protect U.S. industry yet had the opposite effect. Other countries enacted their own tariffs and soon world trade fell 40%. US industry and farming found the last few international markets closed off to them. Unemployment got worse

DID THE ACTIONS OF PRESIDENT HOOVER CAUSE THE GREAT DEPRESSION?

YES and NO – The Reconstruction Finance Corporation ( RFC ) Hoover set up helped a bit

# Hoover was attacked by some laissez faire Republicans for setting up the RFC because it smelled too much like state intervention in private business ( as this cartoon suggests ) # The RFC gave LOANS to the banks mainly to help them keep open which was good. It was as far as Hoover was prepared to go in terms of state interventionBUT THE PROBLEM WITH THE RFC WAS …..# People saw these as handouts to business while millions of ordinary people were suffering – it seemed that rugged individualism did not apply to business.# The loans given were small and did little to really help

YES – Hoover’s attitude to the Bonus Marchers showed how out of touch he was with people 3,000 unemployed and poor World

War 1 veterans marched on Washington

to ask for an early payment of bonuses

due to be paid to them in 1945. Troops

and police were used by Hoover to

clear their Hooverville just outside

Washington – the excuse used that they

were communists out to bring down the

government. A shameful episode but it

made people hate Hoover

Many Americans hated Hoover, and the bitterness directed towards him showed how they wanted a

scapegoat“We were heroes in 1917 said one veteran bitterly, but we’re bums now” – A Bonus Marcher

"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.“ – Andrew Mellon, U.S. Treasury Secretary December 31, 1929

"I am convinced that through these measures we have reestablished confidence.“ Hoover, December 1929

“ Why don’t they make him quit, He’s not doing himself or the party any good. It’s turning into a farce. He is tired physically and mentally” - A Republican Senator about Hoover in the 1932 election. “Give me a lift or I’ll vote for Hoover” – A sign held by a hitcher during the 1932 election

Comprehension questions on the Crash and Great Depression

1. Why were Americans convinced that buying shares in the 1920’s would make them rich?

2. Why was there panic selling on “Black Tuesday”

3. How did this ruin speculators?

4. What were the weaknesses in the 1920’s economy that made the Crash inevitable?

5. How could it be said that the Crash caused the Great Depression in the early 1930’s?

6. Why were the effects of the Depression particularly bad for Americans?

7. How could it be said that President Hoover caused the Great Depression?

8. Why was self help not an option for people?

9. Define the following terms – THE BULL MARKET, UNDERCAPITALISED BANKS, DEPOSITORS, INVESTORS, HOOVERVILLES, HOBOES,

OKIES, DUST BOWL, VOLUNTARISM, THE BONUS ARMY

Comprehension questions on Hoover

Refer to overproduction and market saturation, inequalities in wealth, margin buying, speculation by the Banksin the Stock Market, laissez-faire and the lack of regulation.

Refer to the impact on industry and agriculture and why Americans suffered such poverty

Refer to Hoover’s philosophy, the Hawley Smoot Tariff, and the RFC