The Great Depression

1. The Great Depression Chapter 14: Causes and Impact Ms. Garratt

2. What is a depression? • A period of severe reduced economic activity • Sharp rise in unemployment • Decrease in consumerism due to unemployment or low on savings • Black Tues, October 29th, 1929 was the worse US depression

3. There was not one single reason for the Depression. There were many.

4. Problems on the Horizon • Gap between rich & poor • Key industries struggled (rr/coal, lumber) • Consumers & farmers going into debt • Margin buying

5. #1 Overproduction • AKA “plague of plenty” or “great glut” of farm & factory goods • Nation’s ability to produce surpassed its ability to consume • Profits of big business went to wealthy who reinvested in factories rather than raising salaries & wages which would have stimulated more consumerism • Installment & credit also encouraged overproduction while new technology added to unemployment

6. Stock Market Crash - 1929 • #2 Margin Buying • Speculators bought on margin • Borrowed $ from stockbrokers • Stock became collateral • When stocks increased speculators sold the stock, repaid broker & profited • When stocks began to decline brokers called in stocks • When speculators couldn’t repay the loan brokers sold the stockbrokers called in their margins

7. #3 International Economic Problems • Remember the Dawes Plan? When US banks were lending Germany $ so it could pay reparations to Allies & speed recovery of the postwar economy. • During the “bull market” when stocks were increasing banks stopped loaning as much $ to Europe and loaned it instead to brokers who were selling stocks on margin. • This decreased international trade • Followed by high US tariffs • Contributed to more underconsumption

8. #4 Restrictive Monetary Policy • The Federal Reserve System which is responsible for regulating the amount of money in circulation followed a restrictive policy that dried up credit. • Tightened the money supply • (opposite today --- stimulus packages)

9. #5 Depressed Farms • During war demand was high • Farmers bought more land & equipment to meet the demand. • However, farm prices plummeted after WWI • Surplus of food led to depressed prices. • McNary-Haugen bill vetoed (artificial price supports) • Foreclosures began

10. Consumerism • Major layoffs in late 1920s • People had less $ for consumerism • Had accumulated credit debt • Wages of poor didn’t keep up

11. Who Was Hurt by the Depression? • Speculators & long term investors • Overnight they went from millionaires to paupers – in a few months stock prices fell 75% • Joke at the time about guests checking into a hotel “Will this be for sleeping or jumping?” • Regular “innocent” people who put their savings in banks. • Banks had lent $ to brokers, when margins weren’t repaid they lost everything • Banks were not insured at the time like today

12. Depositors Waiting to Withdraw their savings

13. Failure of the Banks

15. Hoover’s Initial Response • His response was consistent with Republican philosophy – minimal gov interference in the economy • However…. • Asked business leaders for a pledge not to cut wages or production of goods • Suggested that city & state govs fund bldg projects • Agric Marketing Act & Farm Board (?) • Farmers lost their mortgages

16. Depression Worsens • 1929 23,000 businesses failed; 32,000 in 1932 • Average income in 1929 was $2300 reduced to $1600 by 1935 • Unemployment in 1929 was 5% and rose to 25% by 1932 • Bread lines, soup kitchens, Hoovervilles • Brother Can You Spare a Dime? Yip Harburg

18. Soup Kitchen

19. Food lines

20. Poverty

21. Photographer Dorothea Lange

22. Bread Line - NYC

23. Hoovervilles

24. Too Little Too Late • Hoover reluctantly agrees to intro new gov programs. • Reconstruction Finance Corp – largest fed’l program ever at that time • Authorized to dispense $2 billion – supposed to have trickle-down effect • Emergence Relief Act - $300m to states on verge of bankruptcy • Neither successful

25. Bonus Army 1932 • Veterans of Great War were promised a bonus payment in 1945 • Veterans organized the march to lobby for early payment • Very well disciplined & organized • Agreed to honorable code of conduct • By the time they reached DC there were 1700 • Senate rejected the bill

26. Bonus Army Asks for Early Relief

27. Bonus Army Encampments 1932

29. Aftermath • Most veterans returned home • About 2000 remained • Hoover dispatched Douglas McArthur & his aide Eisenhower to force veterans out • Cavalry, infantry, tanks, machine guns were present • Torched the “Hoovervilles” • 100 people injured • 1 Child killed from tear gas

30. US Army Uses Force to Disperse Bonus Army

31. US Army Torches Camps

32. Hard times a “hoovering”

33. Impact of the Bonus March • Political suicide for Hoover – seen as bully • “Nailed his coffin shut” • Press commented “What a pitiful spectacle that the American Government, mightiest in the world, chasing unarmed men, women and children with Army tanks.” • FDR comment “that just won me the election.”

34. Hoover Stuggles with the Depression ml • Cautious approach • Gov role to encourage & facilitate cooperation • Opposed federal welfare or direct relief • Boulder Dam • Democrats take back the House in 1930 • Farmers “dump” milk rather than… • Farm holiday

35. ML add • Hoover blankets – newspapers • Hoover flags – empty pockets • Federal Farm Board • National Credit Corporation • Federal Home Loan Bank Act • Reconstruction Finance Corp ($2b hoped for trickle down effect never happened) • Unprecedented example of federal involvement • Patman Bill and Walter Waters

38. The End Section 1 - Glencoe