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Essential Question: What caused the Great Depression & how did the federal government respond?. The Great Depression. The Great Crash. Prelude to the stock market crash In 1927, the economy had a recession but gov’t & business leaders ignored warning signs
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Essential Question: • What caused the Great Depression & how did the federal government respond?
The Great Crash • Prelude to the stock market crash • In 1927, the economy had a recession but gov’t & business leaders ignored warning signs • The Federal Reserve lowered interest rates for loans to stimulate the economy, but this easy credit led speculators to buy stock “on-the-margin”
The Great Crash • An initial stock market crash on Oct 24, 1929 (Black Thursday) led to a catastrophic drop in stocks on Oct 29 (Black Tuesday) • Panicked investors sold stocks, causing stock prices to plummet • Banks lent less money, factories produced less, workers were fired or paid less → consumers had less money to spend → factories & businesses closed
The U.S. stock market had only about 3 million active buyers & sellers but the spillover into the greater economy led to the Great Depression
Unemployment, 1929-1942 This downward spiral continued for 4 years; By 1932 unemployment was at 25%
The Great Crash • Reasons for the depression: • Overproduction of consumer durable goods & agriculture • The post-war conditions in Europe decreased foreign trade • Unequal distribution of wealth, high consumer debt, stock market over speculation led to an overall decrease in consumer purchase power Consumers already owned durable goods & were not buying more
In 1929, the total market debt of the USA was 210% of the value of GDP By 1934, U.S. debt rose to 265% of GDP In 2005, the value of U.S. debt was 303% of GDP
Effects of the Great Depression • The Depression hit all classes: • Many families lost their homes or farms & were forced to live in “Hoovervilles” • The U.S. saw unprecedented poverty & suicide rates; fathers abandoned their families; lawlessness ensued • The U.S. gov’t offered relief checks to the unemployed
Effects of the Great Depression • African-Americans who had migrated to North were laid off • Mexican immigrants faced competition & deportation from angry Americans • The middle class was hit hard: • Refused relief checks & charity • Many lost their homes • Health care declined; doctor & dentist visits were “luxuries”
Essential Question: • What caused the Great Depression & how did the federal government respond?
Hoover and Voluntarism “Rugged individualism” • PresidentHoover’sinitialresponse was to reassure Americans that prosperity would return • Hoover rejected bold gov’t action & called for volunteerism among charities, local gov’t, & business • As the depression worsened, Hoover called for gov’t projects like the Reconstruction Finance Corps (RFC) which loaned money to failing businesses
Andrew Mellon • Weed out weak banks • Repay War debts • Reduce taxes – balance budget • No Public relief
The Hoover administration initiated job-creation programs, like building the Hoover Dam
Hoover and Voluntarism • In 1932, Hoover’s presidency suffered two final blows: • When 22,000 war veterans marchedtothecapitaltodemand their WW1 bonus checks early, Hoover ordered this Bonus Army to be forcibly removed • The steady rise of bank failures led to a complete collapse of the U.S. banking system
Hoover overreacted and sent in the army who burned the veterans out (Led by Douglas MacArthur and Dwight D. Eisenhower)
Hawley-Smoot Tariff • Against his own wishes Hoover signed this tax on over 20,000 imported goods. • Hoped it would protect our devastated farmers as he had promised to do • Thousands of economics petitioned for Hoover to veto the bill b/c economy was on the recovery late in 1930. • Other nations retaliated with their own high tariffs shutting down trade around the globe and closing markets when US most needed them. The biggest Economic blunder in American History?
Farmers were hit with many hardships: Many had gone into debt to buy machinery and land, and low prices wiped out potential profits. Drought of 1931-1932 turned much of Midwest into a Dust Bowl While many Okies and fellow farmers migrated, most stayed put because at least they could still plant food for survival
Why did it happen? • During the farming years (late 1800’s -1930), massive farming destroyed the native grasses that grew in this area (invention of tractors made it worse). • As the native grasses were removed, more soil was exposed. This was fine during the wet period. • Then in 1933, the drought hit.
“Okies” & “Arkies” The Dust Bowl (1931-1939) worsened the effects of the Depression
Migrant Workers (Okies) • Countless farms and homes were foreclosed. • People moved from all the Great Plains states, although Oklahoma saw the greatest exodus. • These migrants came to be known as Okies. • Their biggest destination – California, where migrants would work the fields, and travel as the crop seasons changed.
Ridin’ The Rails Some 300,000 transients, or “hoboes,” wandered the country 300,000 school children out of school Some famous people who rode the rails • Novelist Louis L'Amour • TV host Art Linkletter • Oil billionaire H. L. Hunt • Journalist Eric Sevareid
Fighting the Depression • The inability of Republicans to resolve the economic depression opened the door for a Democratic takeover in politics • Once in power, Democrats succeeded in relieving some suffering, restored hope, & created an unprecedented level of gov’t intervention in the process
Conclusions • The Depression of the 1930s came as a shock to Americans: • The consumer revolution led to confidence that 1920s economic prosperity would continue • When the stock market crashed in 1929, businesses closed & millions were unemployed • Americans began to look to the gov’t for unprecedented support
