Chapter 10The Great Depression

Section 1: The End of ProsperityThe collapse of the stock market in 1929

helped lead to the start of the Great Depression.

Key terms: Hoovervilles, stock market, on margin, black Tuesday, business cycle, Great Depression, Bonus Army, Franklin D. Roosevelt

The Stock Market CrashesDuring the booming economy of the 1920s many

invested money in the stock market.The stock market is an organized system for buying

and selling shares, or blocks of investments, in corporations.

Many bought stock on margin (paying only a fraction of the stock price and borrowing the rest).

Fearing the boom market would end some investors began selling their stocks in late September making stock prices fall. This decline continued until Oct. 24 “Black Thursday” when panicked traders sold almost 11 million shares. This confusion and panic continued until Oct. 27 – “Black Tuesday” when more than 16 million shares sold collapsing the stock market.

Banking CrisisOne immediate effect of the stock market crash was a banking crisis.In 1931 alone more than 2,200 banks closed – people who had deposited their life savings in those banks lost everything.

The CausesDuring the next two years, the U.S. slid into a

severe economic crisis called the Great Depression.

The U.S. economy has followed a pattern of ups and downs known as the business cycle.

While the stock market crash shocked the nation it did not cause the Great Depression. The following factors did:

Overproduction of goods, uneven distribution of wealth, declining world trade which led to an International Depression

Hoover and the CrisisPresident Hoover thought the economic crisis

was only temporary and that prosperity was “just around the corner”. He did not believe that it was the federal government’s role to provide direct relief to Americans. He called on business leaders not to cut wages and on charities to do their best for the needy.

Eventually Hoover recognized that the federal government had to take steps and in Jan. 1932 Hoover asked Congress to create the Reconstruction Finance Corporation.

Hoovervilles

The Bonus ArmyCongress had agreed to give each veteran of

WWI a $1000 bonus in 1945 but jobless veterans wanted the amount right away. In 1932 they formed the Bonus Army and marched to Washington, D.C. to demand their money.

Congress and the Pres. turned them down. Most of the 20,000 left but about 2000 vowed to remain until they were paid – police were called in and two people were killed.

Pres. Hoover responded by calling the army, which burned the camp.

Many Americans were horrified and turned firmly against the president. Many people thought the time had come for a change in government.

Election of 1932Believing they had a good

chance of winning the Presidency the Democrats chose New York Governor Franklin D. Roosevelt as their candidate. During the 1932 campaign, Roosevelt declared that “I pledge you, I pledge myself, to a new deal for the American people.” FDR won in a landslide.