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The Great Depression. 1929-1939. Causes of the Great Depression. The stock market crash In 1929 Wall Street was the financial capital of the world The heart of Wall Street was an imposing gray building, the NYSE Here soaring stock prices reinforced optimism about the booming economy

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causes of the great depression
Causes of the Great Depression
  • The stock market crash
    • In 1929 Wall Street was the financial capital of the world
    • The heart of Wall Street was an imposing gray building, the NYSE
    • Here soaring stock prices reinforced optimism about the booming economy
    • Between Jan 1921 and Sep 1929, the NY Times average of stock prices rose from $110 to $455
    • Many people began to believe that Rep econ policies had ushered in a New Era of rising prosperity
causes of the great depression1
Causes of the Great Depression
  • The stock market crash
    • Wall Street’s speculative bubble burst on Black Tuesday, Oct 29, 1929
    • Waves of panic selling overwhelmed the NYSE
    • The selling reached a crescendo on Tues, Oct 29th
    • Within less than a week stocks lost 37% of their value
causes of the great depression2
Causes of the Great Depression
  • The stock market crash
    • At first the crash appeared to hurt only the 4,000,000 investors who owned stock
    • U.S. vast industrial and agricultural resources were physically unhurt so there seemed no reason for prosperity to end
    • Hoover tried to reassure the nervous public by confidently predicting, “The crisis will be over in 60 days”
    • But Hoover was wrong
    • The crash dealt a severe blow to investors and to banks and revealed and intensified serious econ weaknesses in the U.S. economy
    • Crash of 1929: Sections 6 and 7
causes of the great depression3
Causes of the Great Depression
  • Overproduction and underconsumption
    • In 1929, U.S. factories produced nearly ½ of the world’s industrial goods
      • Generated enormous profits but the wealth was unevenly distributed – the richest 5% of the pop earned nearly 1/3 of all personal income
      • Meanwhile, 60% of all U.S. families earned less than the $2,000/yr needed to buy basic necessities
      • 80% of the nation’s families had NO savings
      • Thus, most families were too poor to buy the goods being produced and had no savings to fall back on if they lost their jobs
    • The U.S. econ was thus simultaneously experiencing overproduction by business and underconsumption by consumers
    • Store owners reduced orders and factories began to cut back production and lay off workers
    • These actions started a downward econ spiral
causes of the great depression4
Causes of the Great Depression
  • The plight of the farmer
    • Many American farmers never shared in the prosperity of the 1920s
      • New methods and inventions enabled farmers to dramatically increase the yield of crops per acre
      • U.S. farmers also faced new competition from grain growers in AU and AR
    • The global surplus of agricultural products drove prices and farm incomes down
      • Unable to sell their crops at a profit, many farmers could not pay off their loans
      • These bad debts forced weakened banks to close
hard times
Hard Times
  • Down! Down! Down!
    • By 1932 investors lost $74 billion as stocks lost 89% of their value
    • During these 3 years 86,000 businesses closed their doors and 9,000 banks declared bankruptcy wiping out 9 million savings accounts
    • The burden of hard times fell most heavily on those least able to afford it
      • Unemployment rose from just 3.2% in 1929 to a staggering 24.9% in 1932
      • Poverty soon became a way of life for 1/4 of the population
hard times1
Hard Times
  • The Dust Bowl
    • A strong, protective carpet of buffalo grass had once covered the Great Plains
    • The grass held moisture in the soil and kept the wind from blowing it away
    • However, as the demand for wheat increased, farmers plowed under the buffalo grass exposing the land to wind and sun
    • Early 1930s, farmers watched a prolonged drought and intense heat dry out the GP
    • Disaster struck without warning or mercy
      • Great black clouds of dust darkened the sky and covered homes and barns
      • “The storms were like rolling black smoke,” reported a Texas schoolboy, “We had to keep the lights on all day. We went to school with headlights on and with dust masks on.”
      • KS, the TX panhandle, OK and eastern CO became known as the Dust Bowl
hard times2
Hard Times
  • The Dust Bowl
    • Agriculture virtually ceased in the hardest-hit areas of the DB
      • Over 350,000 desperate people fled the GP during the 1930s
      • Called “Okies,” they loaded their meager belongings into battered cars and headed west along Route 66 to CA
      • John Steinbeck captured the ordeal faced by these proud but impoverished migrants in his powerful novel, The Grapes of Wrath
    • Surviving the Dust Bowl: Chapter 3 and 5
hard times3
Hard Times
  • Hoovervilles
    • Prolonged unemployment created an army of homeless people
    • The jobless stood in breadlines, sold apples on street corners and slept anywhere they could find shelter
    • Hooverville was the sarcastic term given to shantytowns inhabited by unemployed and homeless people
    • For Americans used to living in a land of abundance, Hoovervilles were among the most sobering sights of the GD
herbert hoover and the great depression
Herbert Hoover and the Great Depression
  • Hoover’s philosophy of government
    • Hoover did not anticipate the sudden econ downturn that followed the crash
    • He believed the econ was sound and that the real problem was a lack of confidence
    • Convinced that econ recovery depended primarily on the business community, Hoover urged leaders to maintain wages, jobs, and production
    • He also urged private charities and local gov’ts to help unemployed workers
    • Hoover rejected calls for fed programs to directly help the unemployed
    • He opposed a gov’t dole because it was against his belief in “rugged individualism”
    • Hoover argued that a program of direct fed relief to individuals would violate the Constitution and undermine the cherished value of “rugged individualism”
    • Hoover’s philosophy hardened into a dogma that prevented him from supporting fed programs to combat unemployment
herbert hoover and the great depression1
Herbert Hoover and the Great Depression
  • The Reconstruction Finance Corporation
    • While Hoover rejected fed programs to help the poor, he did listen to bankers who pleaded for fed aid
    • In early 1932 Congress created the Reconstruction Finance Corporation (RFC) to make emergency loans to distressed banks and businesses
    • The RFC loaned $1.78 billion to 7,400 banks, insurance companies, and railroads that needed help
    • The RFC went far beyond anything the fed gov’t had ever done before
    • Its emergency loans helped limit the number of bankruptcies
    • However, outraged critics accused Hoover of insisting on rugged individualism for people standing in breadlines while at the same time supporting a “billion-dollar soup kitchen” for distressed bankers
herbert hoover and the great depression2
Herbert Hoover and the Great Depression
  • The Bonus Army
    • Hoover’s popularity fell further because of his mishandling of the Bonus Army
    • In 1924, Congress promised a bonus of several hundred dollars to WWI vets (payment would not be made until 1945)
    • Arguing that they needed the bonus money ASAP, many unemployed vets demanded to be paid ASAP
    • Spring of 1932 a Bonus Army of about 20,000 vets converged on D.C. to lobby Congress for a bonus bill providing immediate payment of their bonuses
    • Hoover opposed the bill arguing that its $2.5 billion price tag would make it impossible to balance the fed budget
    • The Senate rejected the bill
herbert hoover and the great depression3
Herbert Hoover and the Great Depression
  • The Bonus Army
    • Although most of the discouraged veterans left D.C., a few thousand remained with their wives and children
    • Their presence embarrassed the Pres
    • In July Hoover ordered about 700 soldiers commanded by General Douglas MacArthur to evict the Bonus Army from downtown D.C.
    • Newsreel cameras captured the jarring spectacle of U.S. Army troops using bayonets and tear gas to drive the vets and their families from their shacks
    • Hoover misjudged outraged public opinion when he proudly boasted, “Thank God we still have a government…that knows how to deal with a mob”
herbert hoover and the great depression4
Herbert Hoover and the Great Depression
  • The election of 1932
    • The deepening depression crippled any chance Hoover had of winning reelection
    • The unending breadlines and Hoovervilles seemed to confirm the image of Hoover as a leader who was insensitive to the plight of the people
    • Sensing victory, the Dems nominated Franklin D. Roosevelt, the popular reform-minded Gov. of NY
    • In a dramatic gesture, FDR broke tradition and flew to Chicago to personally accept his party’s nomination
    • He inspired the convention by promising cheering delegates, “I pledge you, I pledge myself, to a new deal for the American people”
herbert hoover and the great depression5
Herbert Hoover and the Great Depression
  • The election of 1932
    • During the campaign FDR remained deliberately vague about the details of the “new deal”
    • Despite the lack of a real debate on the issues, Hoover and FDR did strongly disagree on the desirability of funding a massive program of public works to relieve unemployment
    • Unlike Hoover, FDR believed gov’t had a responsibility to take aggressive actions to fight the GD
    • Americans understood that voting for FDR meant endorsing a change in fed policy
    • FDR won an overwhelming victory winning 57% of the vote while carrying 42 of the nation’s 48 states
prompt 5
Prompt #5
  • President Hoover made the financial crisis of the 1930s worse by failing to act. Assess the validity of this statement.