Chapter 22 Notes

1. Chapter 22 Notes The Great Depression Begins 1929-1932

2. Section 1: Causes of the Depression Objectives: • Describe the characteristics of the 1920s stock market. • Identify the causes of the Great Depression.

3. The Election of 1928 The Candidates: • Herbert Hoover (R) • Alfred E. Smith (D) Campaign Issues: • By 1928 Prohibition had become a major issue among voters. • Because he favored the ban on liquor sales, Hoover was considered a “dry,” while Smith, was considered a “wet.” • Religious differences sparked a smear campaign against Smith who was Catholic and the belief was that if he was in the White House then the Catholic Church would rule the United States. • Smith’s biggest problem was the prosperity of the 1920s, for which the Republicans took full credit.

4. The Long Bull Market • The wave of optimism that swept Hoover into the White House also drove stock prices to new highs. • The stock market was established as a system for buying and selling shares of companies. • Sometimes circumstances in the stock market lead to a long period of rising stock prices, which is known as a bull market. • In the late 1920s the prolonged bull market convinced many Americans to invest in stocks. • As the market soared, many investors began buying stocks on margin, meaning they made only a small cash down payment-as low as 10% of the price. • To protect the loan, a broker could issue a margin call, demanding repayment of the loan at once. • Buyers hoping to make a fortune overnight engaged in speculation-speculators took risk, betting the market would continue to climb, allowing them to sell the stock and make money quickly.

5. The Great Crash • The bull market lasted only as long as investors continued putting new money into it. • In the later half of 1929, the market was running out of new customers and professional investors sensed danger and began selling off their holdings. • Prices slipped. • Other investors sold shares to pay the interest on their brokerage loans. • Prices fell further. • The comic star, Groucho Marx, was awakened on Oct. 26th to the news that he needed to cover his margin on stock that was selling for far less than when he borrowed to buy them. • Marx was wiped out. • On October 29th, a day later known as Black Tuesday, stock prices took the steepest dive loosing between 10 and 15 billion in value.

6. Banks in a Tailspin • The market crash severely weakened the nation’s banks in two ways. • First, many banks had lent money to stock speculators. • Second, many banks had invested depositors’ money in the stock market, hoping for higher returns than they could get by using the money for conventional loans. • For some banks, the losses they suffered were more than they could absorb, and they were forced to close. • At the time, the government did not insure bank deposits; therefore, if a bank collapsed, customers lost their savings.

7. The Roots of the Great Depression The Uneven Distribution of Income • Most economist agree that overproduction was a key cause of the Depression. • Workers increase in pay was not keeping up with the increase in production, so during the 1920s many Americans bought high-cost items on the installment plan, under which they would make a small down payment and pay the rest in monthly installments. • When consumers could no longer pay their debts they began to cut back causing a slow down in retail manufacturing. • This caused the Cyclical Effect.

8. The Roots of the Great Depression The Loss of Export Sales • Many jobs would have been saved if American manufacturers had sold more goods abroad. • U.S. banks made high interest loans to stock speculators instead of lending money to foreign companies. • Matters grew worse when Congress passed the Hawley-Smoot Tariff, which raised the average tariff on foreign goods to the highest in history. • Designed to protect American manufacturing, it really hurt sales abroad.

9. The Roots of the Great Depression Mistakes by the Federal Reserve • Consumers could get credit too easily instead of raising the interest rate to curb excessive speculation, The Federal Reserve kept it rates very low throughout the 1920s. • 2-Problems-First, by keeping rates low the Fed. encouraged banks to make risky loans. • Second, its low interest rates led business leaders to think that the economy was still expanding. (they continued to manufacture goods causing supply to far outweigh demand)

10. Section 2: Life During the Depression Objectives: • Describe how the Great Depression affected American families. • Discuss how artists portrayed the effects of the depression.

11. The Depression Worsens • In 1930, 1,352 banks suspended operations across the nation, more than twice the number of bank failures in 1929. • By 1933 more than 9,000 banks had failed. • In 1932 alone some 30,000 companies went out of business. • By 1933 more than 12 million workers were unemployed-about one-forth of the workforce.

12. Lining Up at Soup Kitchens • People without jobs often went hungry. • Whenever possible they joined bread lines to receive a free handout of food or lined up outside soup kitchens, which private charities set up to give poor people a meal.

13. Living in Makeshift Villages • Families or individuals who could not pay their rent or mortgage lost their homes. • Throughout the country, newly homeless people put up shacks on unused or public lands, forming communities called shantytowns. • Blaming the president for their plight, people referred to such places as Hoovervilles. • In search for jobs many homeless and unemployed began to wander around the country, walking, hitchhiking, or, most often, “riding the rails.” • These “hobos,” would sneak past railroad police to slip into open boxcars on freight trains for a ride to somewhere else.

14. The Dust Bowl • Farmers faced a new disaster with the beginnings of homesteading the Great Plains, farmers were gambling with nature. • By uprooting the wild grasses that help the moisture in the soil and planting wheat. • When crop prices fell farmers left many of their fields uncultivated. • In 1932 a terrible draught hit the Plains and with no grass or wheat to hold the little moisture the soil dried to dust-from the Dakotas to Texas-America’s wheat fields became a vast Dust Bowl.

15. Escaping the Depression • During the Great Depression many people could scrape together enough change to escape, if for only an hour or two. • Groucho Marx wisecracked while his brothers’ antics provoked hilarity in such films as Animal Crackers. • Marlene Dietrich and Greta Garbo often played doomed beauties. • Walt Disney produced the first feature-length animated film Snow White and the Seven Dwarfs. • Gone with the Wind and the heroine, Scarlett O’Hara captivated audiences with her struggle to keep her Georgia plantation. • On the radio, shows such as The Guiding Light, held women audiences, and became known as soap operas because of their sponsors. • Art and literature also flourished in the harsh and emotional 1930s, for example, John Steinbeck wrote The Grapes of Wrath which tells the story of an Oklahoma family fleeing the Dust Bowl to find a new life in California. • Other novelists influenced literary style itself, one such author was William Faulkner who in The Sound and the Fury shows what his characters are thinking and feeling before they speak.

16. Section 3: Hoover Responds Objectives: • Evaluate President Hoover’s attempts to revive the economy. • Analyze the limitations of Hoover’s recovery plan.

17. Promoting Recovery • Hoover set out to stem the tide of the Depression by increasing the public works, government-financed building projects. • The public works programs only replaced a fraction of the jobs lost in the private sector. • In order to make a real dent in the unemployment problem the government would either have to raise taxes to pay for the cost of such constructions or borrow the money needed from banks, running up huge budget deficits. • Hoover felt both of these options would slow economic recovery.

18. Pumping Money Into the Economy • Trying to Rescue the banks the president asked the Federal Reserve Board to put more money into circulation, but the Board refused. • Hoover then set up the National Credit Corporation, which borrowed money from New York banks to set up a pool of money to be use by troubled banks for loans in their community. • This did not meet the nation’s needs so Hoover asked Congress to set up the Reconstruction Finance Corporation to make loans to banks, railroads, and agricultural institutions. • Direct Help for Citizens-Hoover strongly opposed the federal government’s participation in relief-money that went directly to impoverished families because he believed that only state and city governments should dole out relief.

19. In An Angry Mood • In January 1931, 500 hungry, jobless men and women in Oklahoma City broke into a grocery store and looted it. • Crowds began showing up at rallies and “hunger marches” held by the American Communist Party, which was eager to take advantage of the national problems.

20. Farmers Revolt • In the summer of 1932, farmers also took matters into their own hands. • Between 1930 and 1934 creditors foreclosed on nearly one million farms, taking possession of them and evicting the families. • Some farmers began destroying their crops in a desperate attempt to raise crop prices, in Nebraska grain growers burned corn to heat their homes. • In Georgia dairy farmers blocked highways and stopped milk trucks, emptying the milk cans into ditches.

21. The Bonus Marchers • In appreciation of the World War I service of American soldiers and sailors, Congress in 1924 had enacted a $1,000 bonus for each veteran, to be distributed in 1945. • In 1932 several hundred of them began a month long march to Washington, as they moved east their numbers grew. • The press termed the marchers the “Bonus Army.” • Once in Washington the marchers camp in Hoovervilles.

22. The Bonus Marchers • As weeks went by thousands more joined them bringing their total to around 15,000. • A bill was sent to the Senate, to give the promised bonus early, but was voted down. • Most of the marchers went home but some stayed because there was a lack of jobs back home. • Hoover ordered the Hooverville cleared, just the buildings not the camps. • Douglas MacArthur ignored these orders and sent in the cavalry.