The Great Depression: Stock Market Crash and Economic Fallout

1. The Great Depression (1929-1933)

2. Section 1: The Stock Market Crash • After years of prosperity, the stock market collapsed in October, 1929, sending the entire economy into panic and subsequent depression.

3. Early 1929 • On September 3, 1929, the Dow Jones average was at an all-time high, 381. • Soaring rates brought new investors, but many of the rates were not authentic to the real value of the company.

4. Black Thursday • After the peak in September, stock prices began to slowly decline into October. • Some nervous investors began to sell their shares, contributing to the further decline in prices. • On Thursday, October 24, after a sharp decline on Wednesday, investors pulled their money out quickly, and the market lost $3 billion in one day alone.

5. Black Tuesday • The market stabilized slightly for a few days. • On the following Tuesday, October 29, investors sold shares in a panicked frenzy. • The Dow dropped tremendously in just one day, known as Black Tuesday. • By November, the Down Jones had fallen from its September high of 381 to 198, nearly cut in half.

6. Dow Jones Graph

7. Aftershock • Initially, the Crash hurt only those most heavily invested in the stock market. • Soon, however, the ripple effects spread to even those who weren’t invested.

8. Chain Reactions • In the 1920s banks made risky loans to businesses, investors, and consumers. • When these groups couldn’t pay their loans after the Crash, banks revenue dried up. • Fearful that banks would run out of money, people rushed to withdrawal money from their accounts, known as bank runs. • Banks didn’t have the money because their loans weren’t being repaid.

9. Bank Failures • Because they weren’t being repaid their loans, many banks failed. • Everyone with savings accounts in these banks lost all of their money, even if they weren’t invested in the stock market.

10. Business Cuts • Businesses could no longer borrow money from banks. • Consumers stopped buying goods and services from businesses. • Soon, businesses started laying off workers, leading to historic unemployment rates. • As unemployment increased, consumers bought even fewer goods from businesses, which further caused more lay-offs.

11. Economic Contraction • All of these chain reactions are symptoms of a contracting economy, an economic decline. • An economic contraction is known as a recession, a long and severe recession is called depression. • The Great Crash triggered the most severe economic contraction in U.S. history, the Great Depression, lasting from 1929 to 1941.

12. Impact on Workers and Farmers • With no money or consumption, factories across the country began to shut down. • Small businesses also suffered with few people who could afford to consume. • Crop prices fell dramatically and many farmers lost their land. • By 1932, 25% of the labor force was unemployed and GNP fell from $103 billion to $56 billion.

13. Global Economy • By this era, the global economy was becoming interdependent. • France and Britain had been paying the U.S. their war debts, but weren’t able to after U.S. consumption of imported goods halted. • When American investment in the German economy stopped, Germany could no longer pay their war reparations to Britain and France. • Therefore, it became a Global Depression, with Germany suffering worst of all.

14. Causes • Despite the rising stock prices of the 1920s, much of the wealth was unevenly distributed to a minority of the U.S. population. • Industries had begun producing more than the population could consume. • Those who did consume often did so imprudently, going into debt without backup savings.

15. Overspeculation • In the 1920s, many investors bought stocks with borrowed money, and pledged these stocks as collateral, something of value that could be used as repayment, to buy more stocks. • Much of the stock market boom was based on borrowed money and optimism instead of real value

16. Lack of Government Safety Net • When banks failed in the Great Depression, people lost their entire savings, there was no way to insure the protection of their money. • Today, the government insures money that is saved in banks, even if the bank were to go out of business.

17. Section 2: Social Effects of Depression • Many Americans expected economic recovery to happen quickly after the Crash. Within a year or two, it became evident that the situation was worse than anticipated.

18. Poverty Spreads • Poverty spread throughout society. • Bank closings destroyed the savings of many families. • Job layoffs forced others to foreclose on homes or be evicted from apartments, even white-collar workers who had felt better off than laborers.

19. “Hoovervilles” • Evicted from homes, many homeless Americans moved into shanty towns made of scrap materials, cardboard or tar paper. • Became known as Hoovervilles, in mockery of President Hoover. • Many homeless became drifters, traveling, hitchhiking, and jumping trains around the country from one “hobo jungle” to the next.

20. Farm Distress • Low crop prices cut farmers income and many lost their farms to the banks who sold them at auction. • In protest to low prices, some farmers dumped thousands of gallons of milk and destroyed crops.

21. The Dust Bowl • Economic difficulties for farmers were magnified by an environmental crisis known as the Dust Bowl • During the 1930s, strong winds blew enormous amounts of soil throughout the Great Plains.

22. Causes of the Dust Bowl • For years, farmers had plowed the land and stripped the topsoil of its protective grass and vegetation. • The vegetation had provided the roots to keep soil intact. • Combined with severe drought and heavy winds, this lack of vegetation caused the Dust Bowl. • 60 percent of Dust Bowl families lost their farms.

23. Depression’s Impact on Health • Depression greatly affected the health of those most impacted. • Thousands went hungry, or lacked nutrition from the food they did have. • People lacked the money or resources to properly heat homes or seek medical attention. • Widespread poverty greatly increased stress, anxiety, depression, and suicide rates.

24. Stress on Families • Difficult times often caused extended families to team up and move in together. • Men who lost their jobs felt like a failure to their family. • Families were often ashamed to ask others for help, even when they desperately needed it.

25. Discrimination Increases • African Americans and other minorities were squeezed out of the labor force. • As white Americans lost their jobs, they looked for work doing lower-paying jobs typically filled by minorities. • Thousands of Asian Americans and Hispanics not only lost their jobs, but were deported. • By 1932, 56 percent of African Americans were unemployed.

26. Stories of Survival • Families showed enormous resiliency throughout the Depression. • Wasting nothing, many who lived through the Depression were changed permanently, living frugally and conservatively for the rest of their lives. • People were willing to work hard and do any job to provide for their family.

27. Section 3: Surviving the Depression Despite difficulty, society worked hard and persevered through the Great Depression.

28. Farmers Stick Together • When banks foreclosed on the land of farmers who couldn’t pay their loans, the banks sell the farms at an auction. • Often, neighboring farmers secretly agreed to keep bids low, even mere pennies for the land and equipment. • Then the buyers gave the land back to the original owner. • These auctions became known as penny auctions.

29. Riding the Rails • Many young people left home out of necessity or in search of opportunities. • In the mid-1930s, roughly 250,000 teenagers were living on the road. • These youth often traveled by illegally riding the rails of freight trains.

30. Seeking Political Solutions • Amidst difficulty, people began proposing more radical forms of change. • Both Communist and Socialist Political Parties gained membership during the era. • Norman Thomas, the Socialist Party presidential candidate in 1932 won 2.2 percent of the total vote.

31. Depression Humor • Jokes and humor helped people through their troubles. • Herbert Hoover was at the core of a lot of Depression humor. • “Hoovervilles” - shanty towns • “Hoover blankets” - sleeping under old newspapers • “Hoover flags” - empty pockets turned inside out

32. Prohibition Repealed • In February 1933, Congress passed the Twenty-first Amendment, repealing Prohibition. • Prohibition lasted 15 years. • Most people recognized the Prohibition as a failed social experiment that led to gangsters and organized crime.

33. Empire State Building • One symbol of hope was the construction of the new Empire State Building. • Developer John J. Raskob built the world’s tallest skyscraper, employing 2,500-4,000 people per day. • Building opened on May 1, 1931.

34. End of an Era • By the early 1930s, it became clear that the prosperous, roaring era of the 1920s was ending abruptly. • Aside from economic turmoil itself, a number of 1920s symbols faded away. • 1931- Al Capone brought down • 1933- Calvin Coolidge died • 1935- Babe Ruth retired • 1932- Charles Lindbergh’s infant son kidnapped and murdered

35. Section 4: Election of 1932 • As Hoover’s unpopularity grew, Franklin Delano Roosevelt arrived with a promise of help and a “new deal” for Americans.

36. Hoover’s Strategy • After the stock market crash, President Hoover insisted that the depression was out of his control but that conditions would improve soon. • He stood firmly by this assessment in the following years, but the public’s patience for the promised improvements quickly grew thin.

37. Voluntary Action Fails • Hoover believed that the voluntary action of businesses was the best way to end economic crisis. • At a meeting he organized, business leaders promised not to cut workers’ wages, but didn’t follow through on their commitments. • Hoover’s proposal of voluntary action, rather than government regulation, increasingly upset Americans who wanted the government to do more to help them.

38. Federal Farm Board • Hoover knew he must do something to alleviate the suffering of Americans. • Created a Federal Farm Board in 1929 to help stabilize crop prices. • The program was a failure, lost $150 million and crop prices actually declined.

39. Hoover Dam • To create jobs, the government started new public buildings, roads, parks, and dams. • Construction of the Boulder Dam began in 1930 (later renamed Hoover Dam)

40. Hawley-Smoot Tariff • Attempting to protect domestic industry from import, Congress passed the Hawley-Smoot tariff. • It was the highest tariff in history. • The tariff backfired. European countries responded by raising their own tariffs, rapidly slowing down international trade and escalating the global depression.

41. Reconstruction Finance Corporation • In 1932, Hoover set up the Reconstruction Finance Corporation (RFC). • Gave government credit to large industries, railroads, and insurance companies. • Lent money to banks so they could extend loans. • Banks continued to fail and many Americans felt that Hoover was only helping businesses and the upper class, not ordinary people.

42. Hoover’s Growing Unpopularity • Hoover argued that direct federal relief would destroy people’s self-respect and create a large government bureaucracy. • People resented his refusal to provide direct aid to Americans. • By 1932, Hoover finally broke down to protests and lent money to states for unemployment relief. It was too little too late to restore his image.

43. Veterans March • In 1932, 20,000 jobless WWI veterans and their families camped in Washington, D.C. to protest. • Known as the Bonus Army, they demanded a pension bonus that had been promised for 1945. • The House of Representatives agreed to their demands, but the Senate said no.

44. Bonus Army • Although mostly peaceful, at one point Hoover ordered General Douglas MacArthur to clear Pennsylvania Avenue. • MacArthur used force, tanks and tear gas, to clear the crowd. • Many were injured and mistreating WWI veterans increased Hoover’s unpopularity.

45. Franklin Delano Roosevelt • Franklin Delano Roosevelt, FDR, was nominated as Democratic Party’s presidential candidate. • “I pledge myself to a new deal for the American people.” • FDR represented a new optimism by promising a more responsive government.

46. FDR’s Story • Attended Harvard, worked as a lawyer, a New York State Senator, then became Assistant Secretary of the Navy under President Wilson. • In 1920, he came down with polio and never walked without assistance again. • Being handicapped could’ve been political death, but Roosevelt hid his disability by rare and carefully planned public appearances.

47. Eleanor Roosevelt • Franklin’s wife Eleanor Roosevelt, was a niece of Theodore Roosevelt. • Eleanor herself was educated and deeply politically engaged. • Her extensive involvement with actual political issues during FDR’s Presidency forever changed the role of the first lady.

48. Election of 1932 • “This campaign is more than a contest between two men… it is a contest between two philosophies of government.” –Herbert Hoover • Hoover felt it was not the responsibility of government to fix people’s problems. • FDR felt that large scale problems such as the Depression required government’s help and aid.

49. 1932 Election Results • FDR won the presidency in a landslide. • Experienced large support from new demographics of Democrats: urban workers, coal miners, and Catholic and Jewish immigrants. • In FDR’s Inaugural Address, he famously stated, “the only thing we have to fear is fear itself.”

50. Hoover v. FDR • FDR represented a responsive government, one that helped Americans in need, something people felt that Hoover didn’t do. • One example of their differences is their handling of the Bonus Army. • Hoover used the Army to force them out with tanks and tear gas. • FDR sent Eleanor to them with food and friendly greetings. • “Hoover sent the Army, Roosevelt sent his wife.” became a classic line of the New Deal Era.