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The Great Depression. 1929-1932. The Causes of the Great Depression. 1. Bull Market – steady increase in stock prices over a period of time. 2. Margin - buying stocks on a loan 3. Margin Call- a demand that the investor repay the loan at once 4. Speculation - buying risky stock
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The Great Depression 1929-1932
The Causes of the Great Depression 1. Bull Market – steady increase in stock prices over a period of time. 2. Margin- buying stocks on a loan 3. Margin Call- a demand that the investor repay the loan at once 4. Speculation- buying risky stock 5. Overproduction- produce too much of a product causing prices & profit to go down
The Great Crash • 1. By 1929 the market was out of new customers. • In September, investors sensed danger and began selling off their holdings. • Prices continued to fall
The Great Crash • 2. October 24, the markets plummeted and was known as Black Thursday. • October 29, the market took an even steeper dive and was known as Black Tuesday. • Mid November stock prices had dropped by more than one –third.
The Great Crash • 3. Banks were severely weakened by the market crash. • First by 1929 banks had loaned $6 billion to stock speculators. • Second, many banks had invested depositor’s money in the stock market, hoping for higher returns than they could get by using the money for loans.
The Great Crash 4. When the stock market collapsed, banks lost money on their investments, and speculators defaulted on their loans. • Many banks then cut back drastically on the loans they made. • Consumers and businesses were not able to borrow as much money. • This helped send the economy into a recession.
The Great Crash • 5. More than 10 percent of the nation’s banks had closed by 1932. • If a bank collapsed, all customers lost their savings. • Some depositors made bank runs (people making heavy demands for their money), causing the banks to collapse.
The Roots of the Great Depression • 1. During the 1920s, many Americans had purchased high-cost items on the installmentplan. • buyers stopped making new purchases. • manufacturers cut production and laid off employees. • A chain reaction ensued—when one company shut down, many others were affected.
The Roots of the Great Depression • 2. Many jobs may have been saved if manufacturers had sold more goods overseas. • The Hawley-Smoot Tariff raised the average tariff rate, so foreign countries did the same hurting U.S. business.
The Roots of the Great Depression 3. Instead of raising interest rates to curb risky spending the Federal Reserve kept them low. 4. This caused the Depression in 2 ways: - keeping interest low led to more risk loans - low interest rated made business leaders think the economy was still expanding.
The Roots of the Great Depression 5. After the Depression hit they raised interest rates, tightening credit.
Depression Worsens • Many people were thrown out of their homes, and forced to put up shacks on unused public lands. • The communities were known as shantytowns, or Hoovervilles. - In search of work many people became known as hobos who would wander the country.
Depression Worsens 2. Farmers left their fields unused because of the drop in crop prices. - When a drought hit the Great Plains the exposed soil turned to dust. - From the Dakotas to Texas, America’s wheat fields became a vast “Dust Bowl”.
Entertainment • People used art, radio and movies to escape their problems. - 1937 Snow White and the Seven Dwarfs was produced. - Soap Operas on the radio became popular 2. Artist on the other hand took and painted pictures of how the Great Depression affected average Americans.
Promoting Recovery • Hoover tried to down play the publics fears and believed that rugged individualism would keep the economy moving. • He did increase funding for public works • Set up the National Credit Corporation (this failed) • Set up Reconstruction Finance Corporation (Failed to increase lending)
Promoting Recovery 2. Hoover tried to keep the federal government out of the problems and believed that state and local governments should hand out relief. 3. 1932 he did pass the Emergency Relief and Construction Act. However by this time it could not reverse the problem.
Hoover Responds • II. In an Angry Mood • 1. By 1931 discontentment over the economy led to violence. Looting, rallies, and hunger marches began. During a hunger march at the nation’s capital, police denied protestors food, water, and medical treatment. • Congress intervened, stressing the marchers’ right to petition their government. • Congress permitted them to march on to Capitol Hill.
Hoover Responds • 2. Between 1930 and 1934, creditors foreclosed, or took possession of, almost a million farms. • Some farmers destroyed their crops, hoping the reduction in supply would cause the prices to go up.
Hoover Responds • 3. In 1924 Congress enacted a $1,000 bonus to be paid to veterans in 1945. • In 1931 Congress passed legislation allowing veterans to borrow up to half of the bonus. • In 1932 the “Bonus Army” marched to Washington, D.C., to petition Congress for the entire bonus.
Hoover Responds • 4. After Hoover refused to meet with the Bonus Army, and the Senate voted the new bonus bill down, some of the marchers left. • Some marchers stayed, moving into deserted buildings in Washington, D.C. • When Hoover ordered the buildings cleared, disputes between the police and the remaining people occurred. • General McArthur ignored Hoover’s orders to clear the buildings but to leave the camps alone. • McArthur sent in cavalry, infantry, and tanks to clear the camps. • The route of the Bonus Army marchers and the lingering Depression, tarnished Hoover’s public image.
