Chapter 23 – Section 1 Hoover and the Crash The Great Depression Chapter 23 – Section 1 Hoover and the Crash

The Collapsing Economy The United States economic problems began in the late 1920s. The country was entering an economic recession, thus many major industries began to decline. However, stock prices were still increasing. The prices did not match industry. The rise in prices encouraged risky investments by margin buyers.

Buying on margin is purchasing stocks at a lower price and agreeing to pay off the difference later. When the stock market started falling, margin buyers could not pay off their differences and were force to sell their stocks. The stock market finally crashed on October 29, 1929, the day that would become known as Black Tuesday.

Black Tuesday

The Great Depression Begins The Great Depression was a major economic and social disaster that affected the entire country. The Great Depression lasted 12 years and was triggered by the Great Crash. One of the problems that caused the Great Depression was overproduction. Factories produced more goods than people could afford to buy.

The decline in the industrial goods economy started a downward spiral. As people began losing money they could no longer afford to purchase factory goods. Without the goods being purchased factories could no longer afford employees and began massive layoffs. Without these factory incomes, Americans could no longer afford goods, thus completing the cycle.

A national banking crisis also contributed to the Great Depression A national banking crisis also contributed to the Great Depression. Banks closed because frightened depositors began withdrawing their savings. People had less money because they lost their jobs or savings in the bank.

The Human Costs From 1929 to 1933, the unemployment rate went from 3 to 25 percent. Nationally the number of people without jobs was about 13 million. With little or no money, many people lacked adequate food, shelter, and clothing. The Great Depression was a time of widespread poverty.

Many people stayed in shanty towns, called Hoovervilles, on the edges of cities.

Hoover Responds At first, President Hoover’s advisors recommended doing nothing. They believed the Depression was temporary. Hoover disagreed with his advisors and took action Hoover’s first measures encouraged businesses and local governments – not the Federal government – to take the lead in helping people. He also urged private charities to set up soup kitchens.

The unemployed waited in line for hours to get food

As the Depression worsened, Hoover created the Reconstruction Finance Corporation in 1932 to provide funding to key industries and local governments.

Bonus Army A group of WWI war veterans marched on Washington DC demanding immediate payment of a $1000 bonus that was guaranteed to them in 1945. Hoover responded by sending in police to break up the rally. At least one veteran was killed and 100 were injured. This incident scared the Hoover administration. The treatment of the Bonus Army further damaged Hoover’s popularity.