The Great Depression Begins

1929 - 1932

Chapter 17

The Election of 1928

• Herbert Hoover – Republican vs. Alfred Smith – Democrat (four-time governor of New York; first Roman Catholic to be nominated for president.

• The issue of Prohibition played a major role in the campaign.

• Hoover favored a ban on liquor sales.

• Smith opposed the ban.

• Religious differences – major impact.

• Catholic issue smear campaign on Smith.

• Republicans took full credit for the prosperity of the 1920s; Hoover won landslide victory.

The Long Bull Market

• The stock market - system for buying and selling shares of companies.

• A long period of rising stock prices is known as a bull market.

• Prosperous times during the 1920s caused many Americans to invest heavily in the stock market.

Bull Market

• As the bull market continued to go up, many investors bought stocks on margin, making a small cash down payment.

• This was considered safe as long as stock prices continued to rise.

• If the stock began to fall, the broker could issue a margin call demanding that the investor repay the loan immediately.

• In the late 1920s, new investors bid prices up without looking at a company’s earnings and profits.

• Speculation occurred when investors bet on the market climbing and sold whatever stock they had in an effort to make a quick profit.

The Great Crash

• By late 1929, a lack of new investors caused stock prices to drop, bull market to end, and a bear market to take over.

• Stockbrokers issued margin calls customers placed stocks up for sale stocks dropped further!

• Stock prices fell drastically on October 29, 1929, Black Tuesday, resulting in $10 to $15 billion loss in value!

Bear

Market

The Dow Jones Industrial Average

was created by Wall Street Journal

founder Charles Dow as a way of measuring the

performance of the New York Stock

Exchange. Today, it looks at the value of stocks in 30 of the

top companies trading stock on the NYSE. It is also one

index looked at when gauging how

well the U.S. economy is performing.

• The Crash did not cause the Great Depression....BUT...undermined economy’s ability to hold out against other weaknesses.

* The stock market crash weakened banks.

* Banks lost money on investments, and speculators defaulted on loans.

• Because the government did not insure bank deposits, customers lost their money if a bank closed.

• Bank runs resulted as many bank customers withdrew their money at the same time, causing the bank to collapse.

Roots (Causes) of the Great Depression

• Efficient machinery overproduction prices/profits drop for industry loss of jobs.

• Uneven distribution of wealth in the U.S. added to the country’s economic problems.

* 1929 - top 5% of American households earned 30 percent of the country’s income.

* More than two-thirds of the nation’s families

earned less than $2,500 a year.

• Low wages added to the economic problems.

* Wages did not increase fast enough to keep up with the quick production of goods.

• As sales decreased, workers were laid off.

• Unemployment added to a chain reaction that further hurt the economy.

• Many Americans bought on the installment plan, making a down payment and paying the rest in monthly installments. (Too much credit debt!)

• Paying off installment debts left little money to purchase other goods.

• The Hawley-Smoot Tariff intensified the Depression by raising the tax on imports.

• Americans purchased less from overseas because of the high cost.

• In return, foreign countries raised tariffs on American products, causing fewer to be sold overseas loss of more American jobs.

• Instead of raising interest rates on loans to stop speculation, the Federal Reserve Board made the mistake of lowering the rates.

•

• This encouraged banks to make risky loans and misled business owners into thinking the economy was still expanding.

Great Depression

The Depression Worsens

• By 1933 thousands of banks had closed; millions of American workers were unemployed.

• Unemployed workers stood at bread lines to receive free food or at soup kitchens where private charities gave a free meal to the poor.

Depression-Era

Soup Kitchens

• Americans unable to pay mortgage or rent lost their homes.

• Those unable or unwilling to move had a court-ordered eviction notice delivered by a court officer or bailiff who forced nonpaying tenants out onto the street.

• Many of the homeless built shacks in shantytowns, which they referred to as “Hoovervilles” because they blamed the president for their financial trouble.

Making Turtle Soup

• Hobos were homeless men who hitched rides on RR cars to search for work and/or a better life.

"Riding the Rails"

Hobo Signs

The hundreds of thousands of hobos who roamed the country developed

intricate symbols that they wrote on trees, fences, or buildings to warn or inform other hobos. Many became a part of American folklore.

At the height of the Great Depression there may have been as many as 250,000 teenage hobos.

• As crop prices dropped in the 1920s, many American farmers left their fields uncultivated.

•

• A terrible drought in the Great Plains, beginning in 1932, caused the region to become a “Dust Bowl.”

“Okies” hoping for a better life in California

• Many Midwestern farmers and Great Plains farmers lost their farms.

• Thousands moved west to California hoping to find a better life, but most still faced poverty and homelessness. (“Okies”)

Escaping the Depression

• Americans escaped Depression by going to movies and listening to radio.

• Storylines - overcoming hardships and achieving success.

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

• Other films, like Wizard of Oz, Mr. Smith Goes to Washington, and Gone with the Wind, contained stories of triumph over adversity and visions of a better life.

A young Walt Disney helped

Americans survive the Depression

• Families gathered around the radio daily to hear news or listen to comedians like George Burns or drama series like the Lone Ranger.

• Melodramas, called soap operas, became very popular with housewives.

• Soap operas received their name because makers of laundry soaps often sponsored them.

The Depression in Art

• Homeless and unemployed Americans were subjects of art and literature during the 1930s.

• Artists and writers tried to capture the real life drama of the Depression.

• Thomas Hart Benton and Grant Wood emphasized traditional American values in their art.

Grant Wood

Depression-Era Artist

American Gothic

(1930)

Young Corn (1931)

Thomas Hart

Benton

The Ballad of the Jealous Lover of Lone Green Valley

1934

• John Steinbeck’s 1939 novel The Grapes of Wrath told the story of an Oklahoma family fleeing the Dust Bowl to find a new life in California.

• Steinbeck - like many writers of his time - wrote of poverty, misfortune, and social injustice.

• Novelist William Faulkner’s literary technique, stream of consciousness, revealed characters’ thoughts and feelings before they spoke– thoughts they dared not reveal.

• In his novels, he exposed hidden attitudes of Southern whites and African Americans in a fictional Mississippi county.

Promoting Recovery

• To promote economic recovery, President Hoover held a series of conferences bringing together heads of banks, railroads, big business, labor, and government.

• Hoover received a pledge from industry to keep factories open and stop cutting wages.

• After the pledge failed, Hoover increased public works – government-financed building projects.

A factory financed by the Federal Government

• Hoover asked the governors and mayors to increase public works spending.

• At the same time, however, Hoover refused to increase government spending or taxes. He feared that deficit spending would delay an economic recovery.

• Americans blamed the Republican Party for the Depression.

• As a result, in the midterm congressional elections of 1930, the Republicans lost 49 seats and their majority in the House of Representatives.

Pumping Money Into the Economy

• President Hoover tried to persuade the Federal Reserve Board to put more currency into circulation, but the Board refused.

• Hoover set up the National Credit Corporation (NCC), which created a pool of money to rescue banks, but it was not enough to help.

• By 1932 Hoover felt the government had to provide funding for borrowers.

• He asked Congress to set up the Reconstruction Finance Corporation (RFC) to make loans to banks, railroads, and agricultural institutions.

• The economy continued to decline when the RFC was too cautious in its loan amounts.

• Hoover opposed federal government participation in relief – money that went directly to very poor families.

• Thought relief was the responsibility of state and local governments.

• In July 1932, Congress passed the Emergency Relief and Construction Act to get money for public works and for loans to the states for direct relief.

In an Angry Mood

• 1931 - discontent over economy violence.•

• Looting, rallies, and hunger marches began.•

• In Washington, DC, police denied protestors food, water, and medical treatment.

• Congress intervened, stressing marchers’ right to petition their government.

• Congress permitted them to march on to Capitol Hill.

• Between 1930 and 1934, creditors foreclosed, or took possession of, almost a million farms.

• Some farmers destroyed their crops, hoping the reduction in supply would cause the prices to go up.

• In 1924 Congress enacted a $1,000 bonus to be paid to veterans in 1945.

• In 1931 a bill was introduced in the House that authorized early payment of the bonus.

• 1932 - the “Bonus Army” marched to Washington, DC, to ask Congress to approve the legislation.

• Hoover refused to meet with them; Senate voted the new bonus bill down.

• Some marchers stayed, moving into deserted buildings in Washington, D.C.

• Hoover ordered buildings cleared; led to disputes between the remaining people and the police (and later the army); several deaths.

Reviewing Key TermsDefine Match the terms on the right with their definitions on the left.

__ 1. a long period of rising stock prices

__ 2. a poor section of town consisting of crudely built dwellings usually made of wood

__ 3. demand by broker that investors pay back loans made for stocks purchased on margin

__ 4. nickname given to shantytowns in the United States during the Depression

__ 5. projects such as highways, parks, and libraries built with public funds for public use

A. bull market

B. margin

C. margin call

D. installment

E. bailiff

F. shantytown

G. Hooverville

H. Dust Bowl

I. public works

J. foreclose

F

C

A

G

I

Reviewing Key Terms (cont.)

Define Match the terms on the right with their definitions on the left.

__ 6. buying an item on credit with a monthly plan to pay off the value of the good

__ 7. buying stock by paying only a fraction of the stock price and borrowing the rest

__ 8. name given to the area of the southern Great Plains severely damaged by droughts and dust storms during the 1930s

__ 9. to take possession of a property from a mortgagor because of defaults on payments

__ 10. minor officer of the courts

B

H

D

J

E

A. bull market

B. margin

C. margin call

D. installment

E. bailiff

F. shantytown

G. Hooverville

H. Dust Bowl

I. public works

J. foreclose