Chapter 22 The Great Depression Begins

1. Chapter 22The Great Depression Begins 1929 - 1932

2. Causes of the Depression • A. Election of 1928 • 1. Republican Coolidge chose not to run • 2. Republican Herbert Hoover was his choice • a. Engineer • b. Food Administration head during WWI • c. Sec. Of Commerce • 3. Democrats Alfred E. Smith • a. Governor of New York • b. Irish-American • c. Catholic (1st to run for president) • 4. Campaign Issues • a. Hoover support prohibition (dry) • b. Smith opposed prohibition (wet) • c. Smith’s religion • d. Prosperity of 20s meant Hoover easy win

3. B. Bull Market 1. Stock Market: system for buying and selling… 2. Bull Market: long period of rising stock prices a. 20s was period of bull market b. 10% of households owned stock 3. Margin: making only a small cash down payment on… a. Broker hold stock as collateral plus earn… b. Safe as long as stock prices rising 4. Margin Call: demanding investor repay loan at once 5. Speculation: act of buying stock at great risk… a. Very risky b. Betting on market rising not on future…

4. C. The Great Crash 1. Bull markets last only as long as investors have … 2. September 1929 professional investors sell 3. Prices drop so others sell so prices drop more 4. Black Tuesday: Oct 29, 1929 largest drop ever 5. Banks in a crisis a. Had loan money to investors who lost money b. Had invested depositors money in market 6. News of banks problems cause public to panic a. Run on banks by depositors demanding… b. Banks do not have sufficient cash on hand c. 10% of banks put out of business

5. D. Roots of the Great Depression 1. Overproduction of consumer goods 2. Installment Purchasing: small down payments and… 3. Excessive individual debt through installment purchase 4. Too much dependence on top 5% of population a. Had 30% of nation’s income b. Could not purchase enough to offset production 5. Slowdown in retail mfg as credit limits reached 6. The US Congress!!!!!!!!!!!!!!!!!!! a. Passed the Hawley-Smoot Tariff b. Raised tariffs to highest in US history c. Foreign products cost more so less bought d. Importers lost money-cut jobs-trickle down e. Foreign countries raise tariffs so US sell less f. Fewer sells for mfg and farmers=unemployment g. Raised income taxes on wealthy to 63%. –no…

6. 7. The Federal Reserve System!!!!!!!!!!!!!!! a. Lowered interest rates to banks to encourage… b. Lower rates said economy was expanding… c. Lower rates encouraged business expansion… d. When bad times came-raised rates which is… e. Result was tight credit when people most… “The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.” …Milton Friedman

7. Life During the Depression • A. Depression Worsens • 1. Bank failure continue to increase • 2. Family income decline by 30% • B. Helping Hands • 1. Bread lines: free handout of food • 2. Soup kitchens: run by private charities to feed hungry • C. New Living Conditions • 1. Unable to pay rent, mortgage or taxes lost homes • 2. Bailiffs: court officers who ejected nonpaying tenants • 3. Shantytowns: shacks on unused or public lands • 4. Hoovervilles: name given to shack communities…

8. D. Farm Conditions 1. Dust Bowl: name given to the area of the southern… a. Severe drought beginning in 1932 b. Grasses destroyed by farming c. Fields now left unplanted with crops d. Top soil became fine dust blown away by wind e. Dust storms from KS as far east as NY f. Penniless families left for CA = Okies

9. E. Escapism 1. Scrape together money for movie or listen to radio… 2. Movies to see a different life style a. Marx Brothers-Animal Cracker, Duck Soup b. Marlene Dietrich & Greta Garbo-beauties c. Walt Disney-cartoons-Mickey Mouse d. Jimmy Stewart-Mr. Smith Goes to Washington e. Clark Gable & Vivien Leigh-Gone With…

10. 3. Radio Drama 1. Soap Operas: daytime serial dramas sponsored… 2. Nighttime drama with serials and new shows 3. Comedy, variety and big band also offered

11. F. Art in the Depression 1. Thomas Hart Benton: artist-emphasized traditional… 2. Grant Wood: artist-emphasized traditional American… 3. John Steinbeck: author-The Grapes of Wrath-realism 4. William Faulkner: author-Look Homeward Angle-… 5. Margaret Bourke-White: photojournalist

12. Hoover’s Reaction/Actions to the Depression • A. Attempts at Recovery • 1. Public works: government financed building projects • a. More in 4 years than 30 years • b. Ship building when ships were not needed… • c. Where is the money? • 2. Factor’s promise short-lived and unsustainable • 3. Lack of recovery led to wins by Demo in 1930 election • B. Pumping Money • 1. National Credit Corporation • a. Pool of money to help troubled banks • b. Contributions by sound banks not enough • 2. Reconstruction Finance Corporation • a. Money for failing RR, banks & agri institutions • b. Eventually loaned money to states • c. Dubious plan with dubious effect

13. 3. Direct Help a. Relief: money direct to families b. Emergency Relief and Reconstruction Act c. Good money after bad-things continue down C. Angry People (w/o sound reasoning) 1. Hunger marchers broke into stores and looted them 2. Hunger marches organized by Communist Party 3. “Feed the hungry, tax the rich!” (sound familiar) 4. Farmers destroy crops, milk, stop deliveries while… 5. Bonus Army: veterans demanding bonus now due… a. Set up Hoovervilles in Washington DC b. Congress voted down early payment c. US Army under Douglas MacArthur attacked d. Ordered by Pres not to use violence they did e. Added to Hoover’s problems at reelection time