1929 – 1932 Chapter 17. Causes of the Depression Election of 1928 Herbert Hoover nominated by Republicans Successful engineer Seven years as Secretary

1929 – 1932

Chapter 17

Causes of the Depression

• Election of 1928 Herbert Hoover nominated by

RepublicansSuccessful engineerSeven years as Secretary of

Commerce Alfred Smith nominated by

DemocratsGovernor of NYRoman-CatholicIrish-American


• Campaign Issues Prohibition major issue Smith’s Catholicism Prosperity of 1920’s claimed by

Republicans Hoover won election


• The Long Bull Market Prosperity of 1920’s drove up prices of

stock Stock Market – system for buying &

selling shares of companies Bull Market – prolonged period of heavy

investment Margin – the purchase of stocks using

down payment of 10% with rest owed to stock broker or bank

Margin Call – demand that the investor repay the loan at once

Speculation – buyers hoping to make a fortune took risks


• The Great Crash By late 1929 the stock bubble was

recognized and experienced traders started selling

Prices slipped causing more to sell Margin calls were made forcing people

to sell stocks for less than they paid October 24 “Black Thursday” – market

prices plummeted October 29 “Black Tuesday” – stocks

lost $10 -$15 billion in value Most money gone – people in debt Stock market lost $30 billion in value


Banks weakened – had lent money to investors to buy stocks and had invested bank money in stocks

With less money, banks could not make loans – caused recession

Some banks forced to close (end of bank) causing bank runs

Bank runs – people pull all their money out of the bank causing the bank to close

During first two years of Depression 3,000 banks closed (10% of nation’s total)


• Roots of the Great Depression Stock market crash caused recession

but other forces caused Depression Overproduction – factories and farms

more efficient and produced more goods but low wages meant people bought less

Installment Plan – consumers bought goods by making down payment then making monthly payments

Consumers now paying down debt – not making new purchases

No purchases meant factories lay off workers – chain reaction


Loss of Export Sales – banks lent money to stock speculators instead of foreign companies so fewer foreign companies bought American products

Hawley-Smoot Tariff – highest tariff ever to protect American business but foreign retaliation caused exports to drop 80%

Mistakes by Federal Reserve – failure to raise interest rates caused businesses to overproduce and led to risky loans

Life During the Depression

• Depression Worsens By 1932 unemployment rate about

25% Average income dropped by 30% Bread Lines & Soup Kitchens – free

food for the needy Foreclosures & Evictions – people

turned out of homes & apartments by bailiffs (court officials)

Shantytowns (Hoovervilles) – shacks made from wood, sheet metal, and cardboard on public lands

Hobos – wanderers going from town to town by rail looking for jobs or handouts


• The Dust Bowl Prairie grasses torn up for wheat

fields Low crop prices resulted in fields

left unplanted Drought beginning in 1932 caused

soil to turn to dust High winds caused destructive

dust storms Many farmers had nothing left and

had to migrate – may went to California


• Escape People could escape the hard times if

only for a few hours through movies and radio

Many movies contained spirit of optimism

Radio had everything from drama to comedy to music

Daytime dramas known as soap operas Grapes of Wrath – novel by John

Steinbeck describing the hardships of migrant farm family escaping the Dust Bowl

Hoover Responds

• Hoover asked business to keep factories open and stop slashing wages – they complied for awhile then rejected pledge• Increased public works – construction

projects financed by the government• Only way to increase jobs was through

deficit spending – idea rejected• As a result of Depression, Republicans

lost control of the House

Hoover Responds

• Bank closures had diminished money supply

• Hoover requested Federal Reserve to put more currency into circulation – Fed refused

• Hoover set up Reconstruction Finance Corporation – to make loans to banks & businesses

• RFC ultimately failed• Hoover opposed using federal funds for

relief – money going directly to poor families

• By the time he did act it was too late

Hoover Responds

• American public becoming desperate• Oklahoma City – 500 people held

“hunger march” sponsored by Communist Party• Communist Party saw biggest

increase in membership during Great Depression• Many farms foreclosed – farmers

destroyed crops to increase prices

Hoover Responds

• The Bonus March WWI veterans promised $1,000

bonus to be paid in 1945 Hundreds of vets marched on

Washington DC wanting bonus now

Called themselves “Bonus Army” Set up “Hoovervilles” and ranks

swelled to 15,000 Some occupied government

buildings

Hoover Responds

Hoover called on Army Chief of Staff, Douglas MacArthur to clear buildings

MacArthur went further and destroyed veteran shantytown killing baby boy

Hoover blamed for the harsh measures and the government inability to deal with the crisis

Documents

1929 – 1932 Chapter 17. Causes of the Depression Election of 1928 Herbert Hoover nominated by Republicans Successful engineer Seven years as Secretary