1. Chapter 18: The Great Depression Begins 1929-1932 Lesson 1: The Causes of the Depression

2. The Election of 1928 ▫The Republican candidate is Herbert Hoover  Hoover was former head of the Food Administration and Secretary of Commerce. ▫The Democratic candidate is Alfred E. Smith  Smith was the four- time governor of New York and the first Roman Catholic to be nominated for president. ▫Religious difference between the two candidates had a major effect on the campaign. The Catholic issue led to a smear campaign against Smith. ▫The Republicans took full credit for the prosperity of the 1920s. ▫Hoover won the election in a landside.

3. The Long Bull Market: ▫The Stock Market-  The stock market was established as a system for buying and selling shares of companies.  Bull Market-  A long period of rising stock prices.

4. ▫Prosperous times during the 1920s caused many Americans to invest heavily in the stock market. ▫As the bull market continued to go up, many investors bought stocks on margin or making a small cash down payment.  This was considered safe as long as stock prices continue to rise. ▫If the stock began to fall, the broker could issue a margin call where he demands that the investors repay the loan immediately. ▫In the late 1920s, new investors bid prices up without looking at a company’s earnings and profits.  Speculation occurred when investors bet on the market climbing and sold whatever stock they could in an effort to make a quick profit.

5. The Great Crash: ▫By late 1929, a lack of new investors in the stock market caused stock prices to drop and the bull market to end. ▫As stockbrokers advised their customers of margin calls, customers responded by placing their stocks up for sale, causing the stock market to plummet further.

7. Black Tuesday ▫October 29, 1929- Black Tuesday  The stock market crashed resulting in $10 to $15 billion loss in value.  Although this did not cause the Great Depression, it did undermine the economy’s ability to hold out against its other weaknesses. ▫The crash weakened the nation’s banks.  Banks lost money on their investments and speculators defaulted on loans.  Because the government did not insure bank deposits, customers would lose their money if the bank closed.  Bank runs resulted when many bank customers withdrew their money at the same time, causing the bank to collapse.

10. The Roots of the Great Depression: ▫Efficient machinery led to overproduction, and Americans could not afford to buy all the goods produced. ▫The uneven distribution of wealth in the United States added to the country’s economic problems.  In 1929 the top 5% of American households earned 30% of the country’s income.  More than 2/3 of the nation’s families earned less than $2,500 a year.

11. ▫Low consumption added to the economic problems.  Worker’s wages did not increase fast enough to keep up with the quick production of goods.  As sales decreased, workers were laid off, resulting in a chain reaction that further hurt the economy. ▫Many Americans bought on the installment plan.  Installment plan was making a down payment and paying the rest in monthly installments.  Paying off installment debts left little money to purchase other goods.

12. ▫The Hawley- Smoot Tariff  Intensified the Depression by raising the tax on imports.  Americans purchased less from abroad because of the high cost.  In return, foreign countries raised their tariffs on American products, causing fewer to be sold overseas. ▫Instead of raising interest rates to stop speculation, the Federal Reserve Board made the mistake of lowering the rates.  This encouraged banks to make risky loans and misled business owners into thinking the economy was still expanding.

13. Lesson 2: Life During the Depression Chapter 18

14. The Depression Worsens: ▫By 1933 thousands of banks had closed and millions of Americans workers were unemployed. ▫Unemployed workers and the poor received food from 2 places.  Bread lines- workers often stood in these lines to receive free food.  Soup kitchens- are private charities who gave a free meal to the pour. ▫Americans who were unable to pay their mortgage or rent lost their homes.  Those unable or unwilling to move had a court- ordered eviction notice delivered by a bailiff who forced nonpaying tenants out onto the streets.

17. ▫Many of the homeless built shacks in shantytowns, which were referred to as “Hoovervilles” because they blamed the President for their financial trouble.  Hobos- homeless Americans who wandered around hitching rides on railroad cars.  They searched for work and a better life. ▫As crop prices dropped in the 1920s, many American farmers left their fields uncultivated.  A terrible drought in the Great Plains, beginning in 1932, caused the region to become a “Dust Bowl.” ▫Many Midwestern farmers and Great Plains farmers lost their farms.  Many families moved west to California hoping to find a better life.  Most still faced poverty and homelessness.

20. Escaping the Depression: ▫Americans escaped hardships of the Depression by going to the movies and listening to radio broadcasts.  Stories tended to be about overcoming hardships and achieving success. ▫Walt Disney produced the first feature- length animated film, Snow White and the Seven Dwarfs.  Films contained stories of triumph over adversity and visions of a better life. ▫Families gathered around the radio daily to hear news or listened to comedy shows.  Soap operas became very popular with housewives.  Soap operas received their name because makers of laundry soaps often sponsored them.

21. The Depression in Art: ▫Homeless and unemployed Americans were the subjects of art and literature during the 1930s. ▫Artists and writers tried to capture the real life drama of the Depression.  Thomas Hart Benton and Grant Wood emphasized traditional American values in their art.

24. ▫John Steinbeck’s 1939 novel The Grapes of Wrath  Told the story of an Oklahoma family fleeing the Dust Bowl to find a new life in California.  Steinbeck and many writers of the time wrote about poverty, misfortune, and social injustice. ▫William Faulkner and Stream of Consciousness  Literary technique that revealed character’s thoughts and feelings before they spoke.  Thoughts they dared not reveal.  His novels exposed hidden attitudes of Southern whites and African Americans if a fictional Mississippi County.

25. Lesson 3: Hoover Responds to the Great Depression Chapter 18

26. Promoting Recovery: ▫In an effort to promote economic recovery, President Hoover held a series of conferences bringing together :  The heads of banks  Railroads  Big business  Labor  Government  Hoover received a pledge from industry to keep factories open and stop cutting wages.

27. ▫The pledge failed and Hoover increased public works-  Public works is government- financed building projects.  Hoover asked the nation’s governors and mayors to increase public works spending.  At the same time, Hoover refused to increase government spending or taxes.  He feared that deficit spending would actually delay an economic recovery. ▫Americans will blame the Republican Party for the Depression.  As a result, in the midterm congressional elections of 1930, the Republicans lost 49 seats and their majority in the House.

28. Pumping Money Into the Economy: ▫President Hoover tried to persuade the Federal Reserve Board to put more currency into circulation, but the board refused. ▫Hoover set up the National Credit Corporation (NCC) which created a pool of money to rescue banks, but it was not enough to help.

29. ▫By 1932 Hoover felt the government had to provide funding for borrowers.  The Reconstruction Finance Corporation (RFC) – made loans to banks, railroads, and agricultural institutes.  The economy continued to decline when the RFC was too cautious in its loan amounts. ▫Hoover opposed the federal government’s participation in relief. He felt that relief was the responsibility of state and local governments. ▫In July 1932, Congress passed the Emergency Relief and Construction Act to get money for public works and for loans to the states for direct relief.

30. In an Angry Mood: ▫By 1931 discontentment over the economy led to violence.  Looting, rallies, and hunger marches began. ▫Between 1930 and 1934, creditors foreclosed almost a million farms.  Some farmers destroyed their crops, hoping the reduction in supply would cause the prices to go up.

31. ▫In 1924 Congress enacted a $1,000 bonus to be paid to veterans in 1945.  In 1931 a bill was introduced in the House that authorized early payments of the bonus.  In 1932 the Bonus Army marched to Washington, D.C.  Hoover refused to meet with the Bonus Army and the Senate voted the new bonus bill down, some marchers left and some stayed.  When Hoover ordered the buildings cleared, disputes between the remaining people and the police resulted in several deaths.