The DepressionOpening Events

Factors Leading to Depression

• Economic floor wiped out• Inequality of income levels

(Half below poverty level)• Easy Credit (High personal debt)• Foreign trade levels dropped (less demand)• Mechanization (Factories required less

employees)• All four combined to send the economy into a

tailspin

The Trigger

• The Stock Market crashed in October 1929• Lost 11% of all value on 10/24 (Black Thursday)• Lost 13% on 10/28 (Black Monday)• Lost 12% on 10/29 (Black Tuesday)

• Stock Market did not recover until 1947

Banking Crisis

• Banks began to fail in the fall of 1930• Farmers defaulted on loans• Rippled throughout the economy

• Runs on banks• People hurried to

remove deposits• Banks failed• All deposits left

were lost

Economy sent reeling

• Unemployment rate soared (reached a high of 25%)• Consumer sales plummeted• Deflation set in• Evictions mounted

Mounting Discontent

• Millions unemployed• Homelessness grew drastically• Formation of “Hoovervilles”

Official Reaction Limited

• Mellon advised to let the economy liquidate• The Crash drove out the bad• Would lead to limited difficulty• Economy would emerge healthier

• “Prosperity just around the corner”• By 1932, 25% unemployed• Thousands left homeless• Money supply contracted

President Herbert Hoover

• Picture of an ideal president• Self-made Man• Noted Engineer• Devoted life to charity at 40• Profound humanitarian• Highly accomplished

Secretary of Commerce

Rugged Individualism

• Old theme in the United States• All should succeed on their own• Government assistance minimal

• “Pull oneself up by one’s own bootstraps”• Fits with the ideal to limit government involvement in

the market• Limits any possible government response

Volunteerism

• Hoover was slow to act• Promoted “Volunteerism”• Convince people to cooperate, not coerce• Keep employment levels up• Refuse to seek raises

• Did not work• Businesses had to show profit• Lack of sales meant no profit

Additional Steps

• Promoted higher tariffs (Smoot-Hawley)• Mexican repatriation• Reconstruction Finance Corporation• Federal Home Loan Bank Act

• Too little, too late• Nation mired

in discontent

Summary• In a short response of one to three sentences, describe two

ways you would improve today’s lesson.