Crash and Depression, 1929 to 1933 (Chapter 22) The Economy of the 1920s

Republican Coolidge decides not to run - turn to Herbert Hoover, millionaire, great administrator Democrats choose Alfred E. Smith - Machine Politician, N.Y. Governor, Catholic Hoover Wins

“We in America today are nearer the final triumph over poverty than ever before in the history of every land” “The poorhouse is vanishing among us”

Buying on Margin - Speculation - Buyer paid some (margin), borrowed rest from stockbroker who held stock as collateral, and stockbroker borrowed from banks to cover loans to buyers Example - General Motors

Bull Market - “Bull” is someone who expects market to rise “Bear” expects market to fall and profits from lower prices - Bulls dominate in the 1920’s - RCA Dreams of Wealth - “Everyone can be a millionaire if they play the market” - Everyone was playing the market

Agricultural Problems - overproduction was main problem - bought land and equipment for WW I demand, couldn’t pay debts High tariff and war debt - foreign nations could no longer afford to sell products and couldn’t pay off war debt - Chain reaction leads to Depression in Europe

Concentration of wealth - 30% of wealth goes to 5% of population (Rich get richer, poor get poorer) Overproduction and credit buying - producing more than could be consumed and installment plan - people living beyond their means buying becomes problem later

Banks Fail - use depositors money to play the market - Bankruns develop - run to bank to take out money before bank runs out Domino Effect - Lose job, reduce spending, cancel orders, sales fall, surplus, unemployment (lose job)

Economist Roger Babson - 9/29 “Sooner or later a crash is coming and it may be terrific” Market listened briefly and short decline in speculation is called the “Babson Break” Margins get called in

10/24/ “Black Thursday” prices begin to drop rapidly, tremendous losses 10/29/ “Terrifying Tuesday” The Crash - 16 million shares traded (normal is less than 5) Rockefeller bought

At the time of the crash - 1/2 million unemployed January, million January, million

Didn’t believe in direct relief, believed it would make people dependent on the government “Rugged Individualism” - people should help neighbors /3 of people needed charity Hoovervilles, bread lines, etc

Asked for money to build buildings, improve waterways, harbors, and public roads Boulder (later Hoover) Dam for irrigation and raise the Colorado River Public Works Administration 1931

Made loans to banks and local and state governments to be used for relief Wanted to allow certain key elements of the economy to remain open and provide legal relief programs

July 22, 1932 Rediscount home mortgages This was too late, many had already lost their homes

Veterans from Oregon set out for Washington, D.C. Seeking WW I bonuses they were not to get until 1945 Veterans from across the country joined them

20,000 total build homes of cardboard and crates across from the White House Hoover orders them to disband, sent soldiers, cavalry, tanks, Macarthur in charge - 2 veterans died Leads to Hoover’s defeat in the 1932 Election

Republicans must stay with Hoover or take blame for Depression Democrats choose Franklin D. Roosevelt Hoover says F.D.R. will destroy the American economy