Chapter 26, Section 1: The Great Crash

1. Chapter 26, Section 1: The Great Crash Main Idea: The prosperity of the 1920s hid weaknesses in the economy that led to the Great Depression of the 1930s.

2. A. An Economy in Trouble • Prices for farm goods stayed low due to overproduction (supply & demand) • demand for new homes and buildings slowed • consumers were buying less • most were not aware of trouble, or chose to ignore the warnings that good times wouldn’t last forever (like water off a duck’s back)

3. B. The Stock Market Plunges • A Nervous Market- increased selling in late 1929 caused stock prices to fall; investors who bought on margin (credit) were asked to pay back their loans (many had to sell their stock to raise the $); by late October, desperate people tried to unload millions of shares of stock • Stock Market Crash-October 29 (Black Tuesday) prices plummeted because there were no buyers; millionaires went broke • Sliding into Depression- the crash sent the economy into a severe depression because people lost confidence in the economy

4. · Some people began to buy stocks on margin, which is similar to installment buying. * Unquestioned faith in the bull market helped lead to the Great Depression!

6. C. Other Causes of the Depression • Overproduction in 20s- too many goods, too few buyers; wages did not rise as much as prices, so many workers could not afford things; this decrease in demand caused many factories to lay off workers • Run on the Banks- many banks loaned $ to stock market investors in the 20s, when the market crashed borrowers could not pay back their loans; without this $ banks could not give depositors their $ when they asked for it and many banks had to close

7. Cycle of disaster- With no investors and banks in trouble, businesses had to cut back production, which led to layoffs and lower wages, which led to less spending, which led to more cutbacks, which led to more layoffs and bankruptcies … Because economies of other countries were tied to the U.S., they collapsed as well. The Depression became worldwide.

8. II. Overproduction / Reduction in Purchasing Farms and factories overproduced beyond the demand. Businesses cut production Demand for goods fell. Workers suffered from wage cuts and lay offs. People had little or no money to spend.

9. D. Hard Times • Families in Crisis-Marriage and birth rates dropped, some families split up to find work • Homeless-drifters looked for work, some “rode the rails”, shack villages, shame & low self-esteem were common • Soaring Unemployment-By 1932, 1 in every 4 workers was unemployed; those that kept their jobs had to take pay cuts

13. E. Hoover’s Policies • Rugged Individualism- Hard work & positive attitude would get us out of Depression. If people relied on the gov’t for help, they ‘d become lazy. • He believed that business would take care of itself and the economy would recover on its own. He opposed govt. relief programs. • Private charity groups organized bread lines and soup kitchens • Reconstruction Finance Corporation (RFC) loaned $ to RRs, banks & insurance companies to save them and help stimulate economy

15. Hoover’s policies did little to help the economy. It got worse each year he was in office. Many viewed him as heartless & uncaring & blamed him for their problems. Hoovervilles- communities of shacks where homeless lived Hoover blankets- newspapers that bums covered up with at night Hoover flag- empty pocket turned inside out

16. “Hoovervilles” Here were all these people living in old rusted-out car bodies. ... One family ... [was] living in a piano box. This wasn't just a little section, this was maybe 10 miles wide and 10 miles long. People living in whatever they could junk together. ..."

17. F. The Bonus Army • WWI vets (20k) came to Wash, DC to demand a bonus that was promised to them. They camped in a tent city for several mos, until Congress rejected paying them early (‘32 instead of ‘45) • When some wouldn’t leave, Hoover called in Gen. MacArthur to destroy the camp (tanks, guns, tear gas)

20. The United States Army burned this and similar camps to the ground after routing the many thousands of protestors that were camped out in the national capital with tanks, tear gas, and troops of armed soldiers. (July 28, 1932)