The Great Depression Begins Chapter 9

Learning Targets Students will be able to explain the causes for the Great Depression Students will be able to describe life of the average American in the early years of the Depression Students will be able to explain President Hoover’s responses to the Depression

The Long Bull Market The Election of 1928  Hoover versus Al Smith  Issues - Catholicism The Stock Market  Bull Market – long period of rising stock prices  Speculation – buying stocks in the hope of selling them quickly for a profit  Margin – buying stocks on small cash down payment. Rest of cost was interest-bearing loan  Margin Call – demanding immediate repayment of loan

The Great Crash Stock prices hit peak and started to fall Investors sold more and more stock causing prices to fall further Margin calls caused people to sell stocks at even lower prices – drove market into tailspin October 1929 Black Thursday – market plummeted/many investors financially wiped out Crash did not cause Great Depression but weakened US financial stability

The Great Crash Banks  Market crash weakened banks  Banks had made loans to stock speculators and invested depositors’ money in stocks  To cover losses, banks drastically reduced loans – businesses and people unable to borrow money  Some banks forced to close – depositors lost all savings  Bank Run - depositors went to banks and withdrew all money  Withdrawals exceeded cash reserves causing more banks to fail  By 1932, 1 in 4 banks closed

Roots of the Great Depression Factors Causing Great Depression  Wealth Gap – fewer people could buy products  Overproduction – Factories/farms produced more but low wages meant people bought less  Agriculture – farmers bought land & equipment during WWI’s high demand. End of war brought low prices wiping out many  Installment Plans (credit) – high cost items bought on credit. People stopped purchasing to pay off debt causing factories to cut production & lay off workers  Downturn caused ripple effect in economy

Roots of the Great Depression  No unemployment insurance or other safety nets  Stock speculation cut loans to foreign nations – foreigners could not buy American products  Hawley-Smoot Tariff – raised tariffs to historical high  Foreign nations retaliated w/high rates – fewer US products purchased  Federal Reserve – kept interest rates low encouraging risky loans. Businesses expanded when sales were falling. Reserve then raised interest rates which tightened credit

The Depression Worsens Bank closures and business bankruptcies continued into 1932 People lost homes or were evicted from rentals – many built temporary houses out of trash on public lands (shantytowns). People called them Hoovervilles after President Hoover Hobos - homeless men and boys wandered across country looking for work or place to stay – many by railroad Repatriation – some immigrants went back to home countries, some forced such as Mexicans. Many were actual American citizens

The Dust Bowl Large-scale agriculture on Great Plains caused erosion of topsoil High winds and drought caused extreme dust storms During 1930’s, about 50 dust storms hit prairie per year Crops were buried, livestock and sometimes humans died due to dust-clogged lungs Migration from affected areas mostly to California (“Okies”)

Arts and Entertainment Art  Emphasized American values  Grant Wood’s American Gothic Literature  John Steinbeck – The Grapes of Wrath Movies  Movie grew in popularity  comedies, child stars, animation – escape from dreary life  Ordinary Americans celebrated as heroes such Mr. Smith Goes to Washington Radio  Daily listening  Soap operas (dramas sponsored by laundry soaps)

Hoover’s Response Hoover believed that American “rugged individualism” would keep US economy moving Tried to get businesses to maintain employment/wages but most failed Funded public work projects – not enough jobs generated Refused to spend money on direct relief – finally relented and signed Emergency Relief and Construction Act Asked Federal Reserve to print more money – Fed refused Set up Reconstruction Finance Corporation (RFC) to loan money to businesses – did not loan enough

Angry Mood People growing desperate Increased instances of looting of grocery stores Hunger marches sponsored by Communist Party Communist Party saw biggest increase in membership during Great Depression ~One million farms foreclosed Farmers destroyed crops to raise prices

Bonus March WWI veterans promised $1,000 bonus payable in 1945 Desperation caused large group (~15,000) to march on Washington DC and demand payment now Marchers squatted in Hoovervilles in city – occupied government offices Congress refused to pay bonus – Hoover ordered army to remove marchers from government buildings General Douglas MacArthur cleared buildings and attacked/burned camps – two veterans killed Hoover blamed for fiasco