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Chapter Introduction

Section 1:The Causes of the Great Depression

Section 2:Life During the Depression

Section 3:Hoover Responds to the Depression

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Chapter Intro 1

The Causes of the Great Depression

What factors led to the Great Depression?


Section 1

The Long Bull Market

A strong economy helped Herbert Hoover win the 1928 election, but increasing speculation in the stock market set the stage for a crash.


Section 1

• Herbert Hoover, a Republican, and Alfred E. Smith, a Democrat, both ran for president in 1928.

− Smith was the first Roman Catholic to win a majority party’s nomination for president.

− Hoover defeated Smith, and promised a bright future for the country.

The Long Bull Market (cont.)

Hoover and “Rugged Individualism”


Section 1

• Sometimes the stock market experiences a long period of rising stock prices, or a bull market.

• In the late 1920s a prolonged bull market convinced many people to invest in stocks.

• As the market continued to soar, many investors began buying stocks on margin, making only a small cash down payment.



Section 1

• To protect the loan, a broker could issue a margin call, demanding the investor repay the loan at once.

• Buyers, hoping for a quick windfall, engaged in speculation.



The Bull Market:

The Storm Before the

Crash


Section 1

The Great Crash

Rising stock process led to risky investment practices; when the stock market crashed, banks were in trouble.


Section 1

• By the latter half of 1929, the market was running out of new customers.

− In September, professional investors sensed danger and began to sell off their holdings.

− Prices continued to fall.

The Great Crash (cont.)


Section 1

• On October 24, a day that came to be called Black Thursday, the market plummeted further.


− On October 29, a day that was later dubbed Black Tuesday, prices took the steepest dive yet.

− By mid-November, stock prices had dropped by more than one-third.

Stock Prices, 1920–1932


Section 1

• The market crash severely weakened the nation’s banks in two ways:


− First, by 1929 banks had loaned nearly $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.

Bank Failures, 1928–1933


Section 1

• 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.

Bank Failures, 1928–1933


Section 1

• 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, causing the banks to collapse.

Unemployment, 1928–1938


Section 1

The Roots of the Great Depression

An uneven distribution of income, tariff policies, and the Federal Reserve Board’s mistakes contributed to the Great Depression.


Section 1

• The roots of the Great Depression were deeply entangled in the economy of the 1920s.

• Most economist agree that overproduction was a key cause of the Great Depression.

• Most Americans did not earn enough to buy up the flood of goods they helped produce.

The Roots of the Great Depression (cont.)

Causes of the Great Depression


Section 1

• During the 1920s, many Americans had purchased high-cost items on the installment plan.

− Paying off such debts eventually forced some buyers to stop making new purchases.

− Because of the decrease in sales, manufacturers in turn cut production and laid off employees.

− A chain reaction ensued—when one company shut down, many others were affected.



Section 1

• Many jobs might have been saved if American manufacturers had sold more goods abroad.


− The Hawley-Smoot Tariff raised the average tariff rate to the highest level in American history.

− However, it failed to help American business because foreign countries responded by raising their own tariffs.

− By 1932 exports were about one-fifth of what they had been in 1929.


Section 1

• Instead of raising interest rates to curb excessive speculation, the Federal Reserve Board kept its rates very low throughout the 1920s.

• The Board’s failure to raise interest rates helped cause the Depression in two ways:


− First, by keeping rates low, it encouraged member banks to make risky loans.


Section 1

− Second, its low interest rates led business leaders to think the economy was still expanding.

• The Board made another mistake after the Depression hit—they raised interest rates, tightening credit.



Chapter Intro 2

Life During the Depression

How did people cope with life’s struggles during the Great Depression?


Section 2

The Depression Worsens

Hunger and homelessness became severe problems by the early 1930s; then, a terrible drought devastated the Great Plains.


Section 2

• Throughout the country, newly homeless people put up shacks on unused or public lands, forming communities called shantytowns, or Hoovervilles.

− Many had been thrown out of their homes by bailiffs.

The Depression Worsens (cont.)

• In search of work or a better life, many hobos began to wander around the country.


Section 2

• Farmers left many of their fields uncultivated due to a drop in crop prices. When a drought struck the Great Plains, the exposed soil turned to dust.

• From the Dakotas to Texas, America’s wheat fields became a vast “Dust Bowl.”

The Depression Worsens (cont.)


A. A

B. B

C. C

D. D

Section 2

0% 0%0%0%

To where did most people from the Great Plains migrate in hopes of a better future?

A. Mexico

B. Canada

C. California

D. Florida


Section 2

Art and Entertainment

Movies and radio shows were very popular during the 1930s, a period that also produced new art and literature.


Section 2

• The hard times of the 1930s led many Americans to prefer entertainment that let them escape their worries.

• In the late 1930s, the “superhero” genre was born with the printing of the first tales of Superman in 1938 and Batman in 1939.

Art and Entertainment (cont.)


Section 2

• During the 1930s, more than 60 million Americans went to the movies each week.

− Walt Disney produced the first feature-length animated film, Snow White and the Seven Dwarfs, in 1937.



Section 2

• While movies captured the imagination, radio offered information and entertainment as near as the living room.

− Radio dramas, nicknamed soap operas, also became popular.



Section 2

• Writers and artists tried to portray life around them, using the homeless and unemployed as their subjects in stories and pictures.

− John Steinbeck and William Faulkner were two influential novelists.



Section 2

• Photographers roamed the nation with the new 35-millimeter cameras, seeking new subjects.

− The striking pictures of photojournalists Dorothea Lange and Margaret Bourke-White showed how the Great Depression had affected average Americans.


• Painters in the 1930s included Thomas Hart Benton and Grant Wood, whose styles were referred to as the regionalist school.


Chapter Intro 3

Hoover Responds to the Depression

How did Hoover’s policies attempt to lessen the Great Depression?


A. A

B. B

Section 3-Polling Question

Do you feel that the government should intervene immediately if the economy is struggling?

A. Yes

B. No

0%0%


Section 3

Promoting Recovery

Hoover encouraged businesses to stop laying off workers and created public works projects.


Section 3

• Hoover tried to downplay the public’s fears, but his efforts failed to inspire the confidence of the American people.

− He believed that the American system of “rugged individualism” would keep the economy moving.

Promoting Recovery (cont.)


Section 3

• Hoover organized a series of conferences to devise strategies for improving the economy.

− By 1931, industry leaders had broken their pledges to keep factories open and stop slashing wages.

− He then increased the funding for public works, but these projects only created jobs for a small fraction of the millions who were unemployed.



Section 3

• Hoover believed that government had to help banks make loans to corporations, which could then expand production and rehire workers.

− In an attempt to ease the money shortage, Hoover set up the National Credit Corporation (NCC) in October 1931.

− This program failed to meet the nation’s needs.



Section 3

• In 1932, Hoover requested that Congress set up the Reconstruction Finance Corporation (RFC) to make loans to businesses.

− The RFC was overly cautious, however, and failed to increase its lending sufficiently to meet the need.



Section 3

• From the start, Hoover strongly opposed the federal government’s participation in relief.

− He believed that only state and local governments should dole out relief.


• However, in 1932, support for a federal relief measure increased, and Congress passed the Emergency Relief and Construction Act.

− By this time, however, the new program could not reverse the accelerating collapse.


A. A

B. B

Section 3

Did Hoover believe that the government should step in to help people, or that the individual should help himself?

A. Government

B. Individual

0%0%


Section 3

In An Angry Mood

Farmers, veterans, and others who were suffering grew frustrated and demanded the government do something to help.


Section 3

• Farmers and the hungry poor began to protest the conditions during the Depression.

• Creditors foreclosed on nearly one million farms between 1930 and 1934, taking ownership of the land and evicting families.

• In May 1932, several hundred Oregon veterans began marching to Washington to lobby for passage of the Wright Patman bill.

In An Angry Mood (cont.)

− The press termed these marchers the “Bonus Army.”


Section 3

• When the Senate voted down the bonus bill, veterans began to grumble.

− General Douglas McArthur was put in charge of handling the situation.

− National press coverage of troops assaulting veterans further harmed Hoover’s reputation and hounded the president throughout the 1932 campaign.

In An Angry Mood (cont.)


A. A

B. B

C. C

D. D

Section 3

0% 0%0%0%

Although Hoover failed to resolve the economic crises, what did he achieve?

A. He gave the Supreme Court more power.

B. He expanded the federal government’s economic role.

C. He created confidence in the banking system.

D. He inspired Americans to trust the government.


VS 1

Causes of the Depression

Long-Range Causes

• Uneven distribution of wealth ensures that many consumers do not have enough income to purchase the goods being produced.

• Interest rates are kept too low by the Federal Reserve, which encourages businesses to borrow money and to expand production beyond market demand.

• Overproduction by business eventually floods the market with goods that cannot be sold. Businesses begin laying off workers and shutting down production.


VS 2


Immediate Causes

• People and businesses borrow money to invest in the stock market; speculation drives stock prices too high and when they collapse, many people lose all of their money, and many banks collapse when loans are not repaid.

• As companies lay off workers, demand for goods falls as workers lack the income to purchase goods being produced. This in turn causes even more layoffs and a cyclical effect sets in, driving up unemployment.


VS 3


Immediate Causes

• In order to protect American companies from competition, Congress raises tariffs. When other countries respond in kind, foreign demand for American goods falls, further hurting American companies.


VS 4

Effects of the Depression

• Unemployment rises to record levels.

• Many people, unable to pay their debts, lose their homes and farms; the homeless create shantytowns, nicknamed Hoovervilles, on the edges of cities.

• Hunger marches, protests by farmers, and marches by veterans seeking their bonuses indicate growing anger among the population at economic conditions.


VS 5

Effects of the Depression

• The Republican Party rapidly loses political support, enabling the Democrats to take control of Congress.

• The federal government, for the first time, begins providing direct relief to citizens in need.

• Forms of entertainment, including movies, radio shows, and comic books, focus on distracting people from their daily lives.


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Vocab1

stock market

a system for buying and selling stocks in corporations

Vocab2

bull market

a long period of rising stock prices

Vocab3

margin

buying a stock by paying only a fraction of the stock price and borrowing the rest

Vocab4

margin call

demand by a broker that investors pay back loans made for stocks purchased on margin

Vocab5

speculation

act of buying stocks at great risk with the anticipation that the price will rise

Vocab6

bank run

persistent and heavy demands from a bank’s depositors, creditors, or customers

Vocab7

installment

buying an item on credit with a monthly plan to pay off the value of the good

Vocab8

collapse

a sudden loss of force, value, or effect

Vocab9

invest

to put money into a company in order to gain a future financial reward

Vocab10

sum

a specified amount of money

Vocab11

bailiff

minor officer of the courts

Vocab12

hobo

a homeless and usually penniless wanderer

Vocab13

soap opera

a serial drama on television or radio using melodramatic situations

Vocab14

suspend

to temporarily stop an operation

Vocab15

colleague

a person who works in the same, or a similar, profession

Vocab16

technique

a method of achieving a desired task

Vocab17

public works

projects such as highways, parks, and libraries built with public funds for public use

Vocab18

relief

aid for the needy; welfare

Vocab19

foreclose

to take possession of a property from a mortgagor because of defaults on payments

Vocab20

series

a number of events that come one after another

Vocab21

community

people with common characteristics living in the same area

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