Great Depression of the 1930s

Boom to Bust

Most Americans believed the economic prosperity of the 1920s would last forever because:

– Companies were producing 50% more from the beginning to the end of the decade

– National income had grown from $64 billion to $87 billion– Most major corporations were making large profits– Everyone was making money in the Stock Market

Boom to Bust

What happened?– Warning signs of economic trouble were missed or ignored including:

– Excessive buying with credit created superficial prosperity– Iron, railroad, & automobile industries weren’t as prosperous– Farms nationwide were suffering heavy losses

Election of 1928

Herbert C. Hoover became the 31st U.S. President

In his inaugural address, Hoover pointed to future prosperity for the American people.

“We in America are nearer to the final triumph over poverty than ever before.”

Stock Market Crash of 1929

Throughout the 1920s, stock prices rose steadily

In order to take advantage of this “bull market”, Americans rushed to buy stocks & bonds in an attempt to “get rich quick”

Because most Americans were “buying on margin” the rising stock prices did not reflect a companies’ actual worth

If stock prices declined, where would they get the money to pay off their loans?

Stock Market Crash of 1929

In early September 1929, stock prices started a steady decline causing some investors to sell their stocks

On October 21 and 23 major declines hit the stock market followed by temporary recoveries– The 2nd recovery was engineered by JP Morgan and Company

and other big name bankers.– This bailout conspicuously (noticeably) bought up stocks to

gain people’s confidence

On Black Thursday October 24th panic selling hit the New York Stock Exchange as stock prices plunged & investors sold quickly

Stock Market Crash of 1929

On Black Tuesday October 29th confidence in the market completely shattered as over 16 million stock shares were sold

Investors that had bought stocks on credit were stuck with huge debts & others lost all savings

Economic Collapse

The Crash signified the start of the Great Depression

The Crash led to bank closings & business failures.

Many Americans attempted to withdraw their savings from banks, but some couldn’t because many banks had also invested in the stock market.

“Brother Can You Spare a Dime”

Fact or Fiction?

Many people believe the Great Depression began with, or was caused by the stock market crash– Is this true?

The stock market crash of 1929 did not so much cause the Depression as help trigger a chain of events that exposed longstanding weaknesses in the American economy.(page 662)

Causes of the Great Depression

End of “easy money” in the US– In the 1920s, Americans made & spent money with ease,

businesses earned large profits, & investors received substantial dividends, but this prosperity eventually ended

Mal-Distribution of Wealth– In the1920’s, a decade of economic growth occurred but more

than 50 % of American families were below minimum subsistence levels. Industrial and agricultural production increased but workers and farmers were not sharing in the profits. Not enough people could afford the numerous goods being produced. Lacked purchasing power.

Causes of the Great Depression

– As a result construction, auto, coal, and other industries found decreased demand. Employees were laid off, which led to even less purchasing power.

– In many expanding industries technology replaced the need for workers. In 1929 it became difficult for these workers to find more jobs as the economy slowed.

Excessive borrowing of money – Most Americans bought goods & stocks on credit with the expectation that it would be easy to repay their debts

Causes of the Great Depression

High tariffs had a negative affect on world trade– High tariffs prevented other countries from selling their goods

in the U.S., in turn preventing them from securing the money needed to buy American products

Credit structure of the economy– Farmers were in debt. Crop prices too low to allow them to

pay off their mortgages. Small banks especially those involved in this industry were struggling.

– Some of or country’s biggest banks were investing recklessly in the stock market & making unwise loans.

Causes of the Great Depression

Life during the Depression

Cities– People lost their jobs & were evicted from their homes– Shantytowns, soup kitchens, & bread lines became common– Unemployment rates rose especially among African & Mexican

Americans

Life during the Depression

Rural Areas– Thousands of farmers lost their land & turned to tenant farming

in order to survive– Dust Bowl

Due to over-plowing the protective layer of prairie grasses was removed allowing winds to carry dust hundreds of miles

Parts of Kansas, Oklahoma, Texas, New Mexico, & Colorado became known as the Dust Bowl as dust storms led to thousands of farmers & sharecroppers left their land behind.

The Dust Bowl

"And then the dispossessed were drawn west- from Kansas, Oklahoma, Texas, New Mexico; from Nevada and Arkansas, families, tribes, dusted out, tractored out. Car-loads, caravans, homeless and hungry; twenty thousand and fifty thousand and a hundred thousand and two hundred thousand. They streamed

over the mountains, hungry and restless - restless as ants, scurrying to find work to do - to lift, to push, to pull, to pick,

to cut - anything, any burden to bear, for food. The kids are hungry. We got no place to live. Like ants scurrying for work, for food,

and most of all for land."

- John Steinbeck, The Grapes of Wrath, 1939

Dust Bowl

Dust Bowl

Dust Bowl

Dust Bowl

Dust Bowl

Dust Bowl

“Okies”

Thousands of families migrated to California and other states (usually conditions not much better)

Called “Okies” because many came from Oklahoma

President Hoover’s Efforts

After the Stock Market Crash, President Hoover tried to assure Americans that the economy was on solid ground

Despite some urging direct relief from the federal government, Hoover believed relief should be provided by individuals, charities, & local organizations

His response only frustrated those struggling as the depression grew worse

Troubles Worsen

Spring 1931- international financial panic– 1920’s European nations relied on U.S. banks for

loans– After 1929 they could not receive these loans– “financial fabric of several European nations began

to unravel (667)”– One of the Largest banks in Austria collapsed

U.S. economy quickly plummeted to new lows

Congress Responds

Congress met December 1931– Conditions were desperately bad, causing Hoover to

support a series of measures that would keep endangered banks afloat and protect homeowners from being foreclosed upon.

Reconstruction Finance Corporation

Bill passed January 1932 Formed the RFC-a government agency

provided federal loans to troubled banks, railroads, etc.

Made $ available to local governments allowing them to support public works projects and relief efforts

RFC and Hoover

Early Hoover programs small scale RFC-Large scale

– 1932 budget-$1.5 billion dollars

Shortcomings of the RFC

Only lent to businesses with sufficient collateral

A lot of money went to Big corporations and banks

Only funded public works projects that would ultimately pay for themselves (ex: toll bridges)

What is collateral?a borrower's pledge of specific property to a lender, to secure repayment of a loan

RFC

Did not have enough money to make a significant impact on the Depression

Did not spend all the money it had either– $300 million available for local relief efforts

RFC only lent out $30 million of that – $1.5 billion budget only lent out 20%

President Hoover’s Efforts

Despite some success from the Boulder Dam project (later renamed the Hoover Dam), President Hoover’s inaction led to him being unfairly blamed for the Depression

Shantytowns became known as “Hoovervilles” & the homeless wrapped themselves in newspaper known as “Hoover Blankets”

“Hoovervilles”

Bonus Army

Congress had promised World War I veterans bonuses to be paid in 1940.

Many veterans were jobless & homeless as a result of the depression & marched to Washington D.C. to ask Congress to pass a law granting the bonuses early.

With Hoover’s backing, the Senate voted down a bill that would provide the bonus

Bonus Army

After a few thousand veterans & their families remained to protest, General Douglas MacArthur decided to drive the Bonus Army out of Washington

The result was intimidation of veterans & their families including one death, which the public reacted to angrily

Question for Review

Why was Hoover so unpopular with many Americans?

Election of 1932

Franklin D. Roosevelt became the 32nd U.S. President by defeating Hoover

Roosevelt’s campaign focused on the depression.

Roosevelt promised that the federal government would “take action” by providing direct relief to combat the depression

FDR’s 1st Inaugural Address

“Let me assert my firm belief that the only thing we have to fear is fear itself.”

A New Deal for the American People

FDR promised the American people he would provide relief, recovery, & reform to get the country out of the depression

Through his alphabet agencies, FDR was taking action