The Great Depression Begins Chapter 9 The Great Depression Begins

Causes of the Great Depression Low interest rates Fed kept interest rates low and companies borrowed money to expand more than necessary Overproduction Companies made more goods than could be sold Uneven distribution of wealth Not everyone wh0 wanted consumer goods could afford them High tariffs Tariffs restricted foreign demand for US goods Failing demands Too many goods were unsold, so production was cut back and employees were laid off Stock market Speculation Low interest rates encouraged borrowing money to invest in the stock market.

Stock Market Crash Stock prices had begun to slowly fall in September, but business & political leaders encouraged the country not to worry By the middle of October, worried investors began to sell their stock causing prices to fall Black Tuesday, October 29, 1929 A record 16.4 million shares were sold (average is 4-8 million) The Great Crash was part of the nation’s business cycle (periods of expansion and contraction)

Changes in perspective Before the Great Depression, the US didn’t ask the govt for much After this time period, our mentality changes and we blame the govt for all of the problems and put the responsibility for solving the problems to the govt

Ripple effects of the crash Initially only affected investors but soon everyone was affected Risky loans hurt banks- Businesses & consumers couldn’t pay off their loans Runs on banks Banks didn’t have enough to cover the deposits made to their banks Bank failures- Unpaid loans & bank runs meant a lot of banks failed Savings wiped out- By 1933, 9 million savings accounts vanished Cuts in production- Businesses could not borrow money to create goods Rise in unemployment- As businesses cut back on production, they laid off workers

The Great Depression Lasted from 1929 until the US entered WWII in 1941 Most severe economic downturn in history By 1932, more than 12 million were unemployed (about 25% of the labor force) world impact- countries had become interdependent and relied on each other for trade, manufacture, and banking When American businesses could no longer invest in foreign countries, they began to suffer too. Our allies could not re-pay their loans. These nations were desperate and this made it easy for Mussolini, Stalin, and Hitler to take over these nations

Underlying causes Unstable economy- Overspeculation- Uneven distribution of wealth, overproduction, problems of the farmers Overspeculation- During the 1920’s, speculators bought stock with borrowed money, then used those stocks as collateral to buy more stock. The stock market boom was based on borrowed money instead of real value Government policies- In 1929, the Federal Reserve limited the money supply to discourage lending. There was too little money in circulation to help the economy recover.

Social effects “Hoovervilles”- Communities of tents and shacks for the homeless

Farm distress Farmers lost their farms to the banks. Some land owners destroyed crops in protest The Dust Bowl- Between 1931-1940, dust storms created by a severe drought caused the fertile topsoil to blow out of the Great Plains. The combination of terrible weather and low prices for farm products caused about 60% of Dust Bowl families to lose their farms Relief did not come to the region until the 1940’s

Poverty strains society People were starving Health problems due to malnutrition Crowded living conditions put stress on families Discrimination increases as competition for jobs increases

Surviving the Great Depression Farmers stick together In some communities when a bank foreclose on a farm, the other farmers would big very low on the farm at auction to return it to it’s orginal owner Riding the Rails- In the mid 1930’s, about 250, 000 teenagers were living on the road illegally riding freight trains Some were looking for work, some looking for adventure Faced danger of injury, arrest, and even death

Signs of Change Prohibition repealed Empire State Building 21st Amendment ended Prohibition and put an end to this failed social experiment Empire State Building Construction began in 1930 and was the world’s tallest building at this time.

Government Acts Hawley-Smoot Tariff Hoover Dam Govt attempt to protect domestic industries from foreign imports; highest import tax in history It backfired and caused a slowdown in international trade Hoover Dam Construction began in 1930 To increase jobs the govt spent more on new public buildings, roads, parks, and dams Reconstruction Finance Corporation (RFC) Lent money to banks so they could extend loans Gave credit to large industries, railroads, etc. Discounted mortgage rates But banks continued to fail

Hoover’s unpopularity grows His attitude towards relief efforts made him seem cold hearted (felt govt should not fix the problems) Bonus Army- This was a low point for Hoover In 1932, 20,000 jobless WWI veterans camped in Washington DC to demand early payment of their bonus payments (promised in 1945) Hoover sent in General MacArthur to clear out the Bonus Army. MacArthur used force and several were injured. Hoover took responsibility for MacArthur’s actions

Election of 1932 Franklin D Roosevelt was governor of New York and had set up several relief programs in that state. He hoped to bring more ideas to the country This was a historic battle between those who believed the fed govt should not fix peoples’ problems and those who felt large scale problems such as the Depression required govt intervention FDR won by a huge margin of 7 million popular votes and carried the electoral vote 472-59