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Chapter 22: The Great Depression Begins

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American History. Chapter 22: The Great Depression Begins. The Long Bull Market. With the election of 1928 came Herbert Hoover, and along with him came great optimism for the country, which also drove up stock prices The stock market is a system for buying and selling shares of companies

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the long bull market
The Long Bull Market
  • With the election of 1928 came Herbert Hoover, and along with him came great optimism for the country, which also drove up stock prices
  • The stock market is a system for buying and selling shares of companies
  • A bull market is a long period of rising stock prices, which was occurring during this time
  • As prices continued to soar, many investors bought stock on margin, or on a small cash down payment
    • Stockbroker would issue a loan to the buyer, earning interest as well as commission, and the buyer would pay back the loan overtime
  • To protect the loan from falling in value, the broker could issue a margin cell, or a request for the buyer to pay back the loan immediately
  • Buyers, hoping to make a quick fortune, would become risky, and instead of investing in the company’s future, would engage in speculation, betting the market would continue to climb
the great crash
The Great Crash
  • The bull market only lasted as long as new investors placed money into it, which did not occur
    • Professional investors began selling their holdings, and other investors sold shares to pay off their loans, both causing prices to fall
    • On October 21st, the stock market plunged with investors scrambling to sell their stocks in order to pay off their loans
    • On October 24th (Black Thursday), the market plummeted further
    • On October 29th (Black Tuesday), prices took the steepest plummet in history
banks in trouble
Banks in trouble
  • The crash hurt the banks in two ways:
    • Banks lent money to stock speculators, who could not not pay back the loans
    • Banks had invested depositor’s moneys into the stock market, which they lost
  • Because of their losses in the financial market, banks had to limit lending money, which made it hard for businesses to borrow money
  • With banks beginning to fail, many investors took out their deposits, for fear that the bank would fail and they would lose their savings
the roots of the great depression
The Roots of the Great Depression
  • The immediate cause of the depression was the stock market crash; however, the long term causes came from the 1920’s
    • Overproduction, and the inability of people to buy up these overproduced goods
      • Most Americans bought items using an installment plan, or a plan to make a small down payment, and pay the rest monthly
    • Families had to limit their spending, which caused a reduction in consumption, which caused a reduction in production, and laying off of employees
    • Loans weren’t being given to foreign countries in order to buy American goods
    • Tariffs (Hawley-Smoot Tariff) increased the prices of foreign goods, which caused people not to buy so much of these goods
    • Interest rates for loans were very low from the Federal Reserve, causing money to become easily accessible
      • Caused banks to make risky loans
      • Businesses borrowed more money to increase production
life during the depression
Life during the Depression
  • With banks failing, unemployment rose and the average annual income for a family went down
  • Those who were hungry had to line up for bread lines and soup kitchens in order to be fed
  • Those who could not pay the mortgage lost their homes
    • Landlords asked bailiffs, or court officials, to kick them out
  • Those who were homeless gathered into a community and built shantytowns
    • Ex. Hoovervilles
  • Many would travel the country in search of jobs (hobos)
the dust bowl
The Dust Bowl
  • A terrible drought hit the Great Plains in 1932, leaving pastures and fields dry
    • Dust would carry hundreds of miles, leaving skies black, and burying crops and livestock
    • Farmers were unable to pay the mortgage on their land, so many moved to California in search of a better life
      • “Okies”, since many were from Oklahoma
entertainment during the depression
Entertainment during the Depression
  • Americans used film and radio to try and escape from the hard experiences of the Depression
    • Many would go to the movies and see rich and powerful people live happy lives
    • Many actors and actresses left their homelands in Europe to seek a better life in America
    • Many also loved cartoons
      • Walt Disney
    • Many listened to the radio at home, listening to soup operas, or stories about troubles in middle class families, and adventure stories
the depression in art
The Depression in Art
  • The homeless and poor were the subjects of many paintings and books written during this time
    • Grant Wood “American Gothic”
    • John Steinbeck “The Grapes of Wrath”
    • William Faulkner “The Sound and the Fury”
hoover responds
Hoover Responds
  • Hoover’s first step was to keep factories open and eliminate slashing wages, which didn’t work
  • Hoover’s next step was to implement public works, or government financed building projects
    • Only made up for a small fraction of jobs lost
  • In order to create new jobs, Hoover had to increase government spending, which he would not do
    • Thought increasing spending would take money away from consumers and businesses, who needed it the most
  • Due to the Depression, the Republicans lost the majority of the House of Representatives and the Senate in the mid-term elections
getting money into the economy
Getting money into the economy
  • Hoover’s plan was to pump money into banks in order for them to lend money to corporations
    • Set up the National Credit Corporation, which contained a pool of money from contributing banks to use towards corporations
  • After this plan failed, Hoover’s only conclusion was for the government to do the lending
    • Set up the Reconstruction Finance Corporation, lending money to banks, railroads, and agricultural institutions
      • Failed, ultimately, in its goal to stimulate the economy
  • Hoover, who did not favor the government becoming involved in relief, or money going towards impoverished families, signed the Emergency Relief and Construction Act, which gave money to state and local governments to go towards public works and relief efforts
people getting angry
People getting angry
  • Hunger marches and grocery store raids began to occur
  • Farmers, in fear of having their lands foreclosed, or taken from them by re-possessors, destroyed their crops in order to raise crop prices
  • Veterans from World War I marched to Washington to petition for early bonus payments they received for military service
    • “Bonus Army”
    • Lost their petition, stayed in Washington, and were forcibly moved out by the military months later