Causes of the Great Depression

1. Causes of the Great Depression

2. Stock Market • Investors poured millions of dollars into the market • Stock speculation (“playing” the market) became popular - this rapid buying & selling inflated stock prices • Margin buying - purchasing stock with borrowed money

3. Ups and Downs • Bull Market • Stocks are on the rise • Bear Market • Stocks are declining • The use of "bull" and "bear" to describe markets comes from the way the animals attack their opponents. A bull thrusts its horns up into the air while a bear swipes its paws down.

4. The Stock Market Crashes • Black Thursday - October 24, 1929 – 13 million shares were changing hands • Panic spread - prices dropped dramatically • Black Tuesday - October 29, 1929 - panicked investors dumped more than 16 million shares of stock • Brokers demanded cash from customers - thousands of people were forced to sell stocks at huge losses

5. The stock market crash didn’t start the Great Depression by itself. Instead, it quickened the collapse of the U.S. economy.

6. Real Causes of the Depression Write down the reasons and explanations

7. The agricultural sector was in trouble. Rural farmers produced huge surpluses of food that depressed prices. Farmers could not afford to buy goods or repay their loans. Despite Hoover’s confidence, some saw signs of weakness in the economy.

8. Credit • Many Americans purchased new consumer products on credit • By 1929 purchases on credit totaled $7 billion • Republican administration believed easy credit policy would promote business • Economic experts warned such debt could cripple consumers

9. Banking Crisis • The crash led to a major banking crisis • Borrowers who lost investments in the stock market could not repay their loans • Some banks were forced to close - some investors lost entire life savings • Led to bank runs - depositors panicked and tried to withdraw savings • Did not cause depression; stocks rallied late in year and business didn’t decline until spring of 1930

10. 1300 banks closed in 1930 • 3700 more next two years • Thousands lost funds that could have been used to buy goods • Bank of US in NYC closed, 400,000 people lost their savings

11. Business Failures • Many businesses suffered from the banking crisis • 1929 U.S. GDP = $103 billion • 1933 U.S. GDP = $56 billion • As businesses failed - unemployment rose

12. Income Gap &Consumer Debt • Between 1923-1929 incomes of wealthiest Americans increased by 63%, incomes of poorest Americans decreased by 4% • This gap meant most people did not have the buying power to boost economy

13. National income fell from over $80 billion to under $50 billion • Unemployment under 1 million at height of boom rose to at least 13 million

14. ???????????? • Mellon tax structure favored the rich and didn’t tax nearly enough as they should have been • Most politicians and professional economists did not fully understand what was happening or what to do about it

15. Global Depression • European countries were dealing with massive war debts • World trade had rapidly declined during the late 1920s • U.S. contributed to the global depression by placing high tariffs on imported goods Hawley-Smoot Tariff Act • Foreign consumers were unable to purchase American goods • Destroyed international trade

16. As international trade falls, a global drop in business leads to a worldwide depression.

17. Hard Times

18. Unemployment • 1929 - 1.5 million Americans were unemployed or about 3.7%, by 1931 - rose to 15 million • Unemployment rate 1933-25% • Even for those who kept jobs, wages fell dramatically • Percentage of women in workforce actually increased in 1930s

19. For many, the only food available came from public soup kitchens or bread lines run by charitable organizations. People sold their property to buy food.

20. Life in the City • During 1930s, federal government did little to assist city-dwellers • City governments, religious groups, & charities tried to provide relief to the needy • Hunger, homelessness, poverty, & unemployment were widespread • Homeless often gathered in shantytowns, “Hoovervilles”

21. Life on the Farm • Farm prices dropped • Farmers had more goods than they could sell • Many farmers were unable to keep their farms, houses, & equipment • Many immigrant farmers were forced to return home • Some farmers became tenant farmers, working for bigger landowners.

22. The remaining farmers on the Great Plains suffered a terrible drought, which led to theDust Bowl. Dust storms destroyed millions of acres of farmland.

23. Millions of tons of topsoil were blown away in giant dust storms. • Farmers had dug up thick prairie grasses to plant wheat so there was nothing to hold the soil in place. • 100 mile-per-hour winds blew dust clouds 8,000 feet tall in Oklahoma, Texas, New Mexico, and Colorado. • Wildlife and farm animals suffocated in the choking winds.

24. In old trucks, they moved west or to northern cities. 800,000 Okiesleft Texas, Oklahoma, Missouri, and Arkansas alone. Rural states lost population during the 1930s. Those who could afford it bought distressed neighbors’ farms at low prices to build expanded commercial farms. Farmers who had lost their land, called Okies regardless of where they were from, were forced to leave.

25. Family Life in the 1930s • Some families pulled together to help each other with housing & food • In other cases, the Depression broke families apart • Marriage rate fell • The Depression also affected the mental health & attitudes of many Americans • Those who were still working felt guilty because friends and relatives were unemployed.

26. Minorities suffered even more during the depression. • As Okies moved west to find work, Mexicans and Mexican Americans faced fierce competition for jobs. • Local governments urged repatriation for Mexican Americans. • Even in good times, African Americans were “last hired and first fired.” • Many were thrown off southern farms where they were sharecroppers.

27. Hoover’s Policies

28. Herbert Hoover did not cause the Great Depression, but Americans looked to him to solve the crisis. He tried a number of different approaches, but in the end hefailed to discover the right formula for stopping the crisis.

29. Opposing Direct Relief • Americans began to demand federal government provide food, shelter, etc. • Hoover rejected & urged Americans to lift themselves up • “Rugged Individualism” – success comes through individual effort & private enterprise

30. Like most economists of the day, he believed that up and down swings in the economy were a natural part of the business cycle. • It was thought that strong businesses would weather storms without the support of the government.

31. Hoover saw that he must do something: Asked businesses to keep wages, employment, and prices at current levels Called for tax cuts, lower interest rates, and public works Asked wealthy to donate more money to charity

32. But volunteerism failed: • Towns and states didn’t have the necessary resources to deal with the depression. • Hoover did not support direct federal aid to individuals. Hoover put his faith in localism,a policy whereby problems are best solved at the local and state levels.

33. The RFC gave billions of dollars to banks and large businesses. Lend to, and invest in, struggling businesses who would hire workers and thus end the depression. The RFC failed when businesses did not hire more workers. In 1932, Hoover urged Congress to create the Reconstruction Finance Corporation (RFC).The RFC employed a policy known as trickle down economics.

34. Boosting the Economy • Andrew Mellon argued the government should not interfere – let businesses handle it • At Hoover’s request, Congress & state governments funded several public-works programs • Hoover Dam

35. Boulder Dam (later renamed Hoover Dam) across the Colorado River. Started in 1930, the huge dam provided power for millions and irrigation for farm land, and put thousands to work.

36. Farm Crisis • Congress passed Agricultural Marketing Act – set up Federal Farm Board • FFB bought surplus corn, cotton, & wheat • This did not work, crop prices still continued to fall. No regulation on how much farmers could grow. • Hoover recommended Home Loan Bank Act in 1932

37. Discontent • Radical protests – Communist Party & Socialist Party blamed capitalism for depression • The Bonus Army – largest protest – 10,000 WWI veterans protested in Washington D.C.

38. Hoover ordered General Douglas MacArthurto remove the veterans. He used tear gas, cavalry, tanks, and troops with fixed bayonets. Press photos of troops using excessive force angered the American public. 20,000 veterans set up camps and occupied vacant buildings. In July, police tried to evict them and riots erupted.

40. The eviction of the Bonus Army doomed Hoover’s bid for re-election. Americans were ready for new leadership and a greater role for the government in solving problems.

41. Election of 1932 • Republicans reluctantly renominated Hoover • Democrat nomination – Franklin D. Roosevelt • Election revolved around depression • Roosevelt proposed “New Deal”