The Great DepressionChapter 18

Objective 9.1 Elaborate on the cycle of boom and bust in the 1920s & 1930s

Election of 1928Prohibition

Herbert HooverRepublican

Pro-Prohibition

Alfred E. SmithDemocrat

Anti-Prohibition

Election of 1928

Calvin Coolidge declined to run for a second term.

Democrats nominated Al Smith (1st Catholic nominated by a major American party)

Republicans nominated Herbert Hoover

The Campaign “wet’s vs. dry’s” Smith’s Catholicism

was made an issue by Hoover supporters—not Hoover.

Big boost for Republicans= the prosperity of the 1920’s.

The Bull Market of the 1920’s 1920’s “Bull

Market” convinced Americans to invest in stocks.

“Buying on margin”- investors could purchase stocks with only a 10% down payment.

If stock prices fell, stockbrokers could issue a “margin call”.

Stock Speculation- because of the bull market, many investors bid up the price of stocks without considering the company’s earnings or profit.

The Great Crash Bull market existed because

of so many new customers – it began running out of new customers

Investors started selling Stockbrokers made margin

calls People began frantically

selling stock Black Tuesday

› Prices took the steepest dive

Result: the crash undermined the economy’s ability to hold out against other problems

Bank Troubles 2 Problems

› Loaned money to speculators

› Invested deposited money in the stock market

Bank Runs› Depositors began

withdrawing all of their money

Federal Reserve

Instead of raising interest rates to cut inflation, the FED kept the rates low› Encouraged banks to make risky loans› Led businesses to borrow more to expand

At the last minute – Wrong Time!!› the FED made another mistake by

raising interest rates

Other Problems Income Distribution

› Most Americans dependent on installment plans for goods

› Debt became high› Cut consumer

spending› Production then

slowed

Overproduction- key cause of the Depression.› Technology enabled

businesses to produce more

› Hawley Smoot Tariff Highest level ever Damaged export sales

› US banks did not lend to foreigners to buy American goods

Depression Worsens Massive Unemployment

› 30,000 companies out of business

Soup Kitchens & Bread lines

Shantytowns (aka Hoovervilles)› Communities of

homeless Hobos

› Homeless wanderers looking for food, work & shelter

HOOVERVILLES

The Dust Bowl

Term used to describe the Great Plains during the Great Depression

1932 Drought Winds whipped dust like snow over the crops & livestock

Oakies› Farmers who gave up their farms & headed

to California

The Dust Bowl

Entertainment, Art & Literature

Escape through Movies & Radio

Marlene Dietrich & Greta Garbo

Walt Disney – Snow White & Seven Dwarfs

Gone with the Wind

Soap Operas – “Guiding Light” – radio

Entertainment, Art & Literature

Grant Wood – American Gothic

John Steinbeck – Grapes of Wrath

William Faulkner – The Sound & the Fury

Margaret Bourke-White - Photographer

President Hoover’s Response to the Great Depression Hoover was a self-

made man (millionaire)

Started poor (orphan) made his way to college.

Believed “rugged individualism” would keep America moving forward.

1930-Organized a series of conferences with business leaders

Business leaders promised to keep businesses open and keep wages stable.

1931-Business leaders broke promises.

Hoover’s Response

Public Works Projects› Government funded

building projects.› How do you pay for

it? Raise taxes? Run a budget deficit?

› Ultimately, government did not spend enough to create many jobs.

Hoover’s Response› National Credit

Corporation (NCC) IN 1931.

› Set aside a pool of money to allow troubled banks to keep lending.› Failure—not enough

money to handle the massive problems.

Reconstruction Finance Corporation› Set up by Federal

government to make loans to banks, railroads & agriculture (1932).

› Lent $238 million to 160 banks, 60 railroads, 18 banks.

› Did not spend enough

Hoover and direct relief

Relief- money given directly to the poor by the government.

Hoover did not support this idea.

He believed that only state & local governments should do this—not the federal government.

1932—Congress passed “Emergency Relief and Construction Act”

Hoover reluctantly signed

1st time US government supplied direct relief funds.

Revolts & Marches

Hunger Marches› Led by American

Communist Party Farmers Revolt

› Destroyed crops to raise the price

Bonus Marchers› Veteran bonuses from

WWI› Veterans marched on

Washington = Bonus Army