Crash and Depression (1929-1933)

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Crash and Depression (1929-1933)
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I. The Stock Market Crash

• October 29, 1929
• The era of wonderful prosperity had come to an
  abrupt end as the New York Stock Exchange tumbled

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A. The Market Crashes

• The Dow Jones Industrial Average (an average of
  stock prices of major industries) was at an
  all-time high on Sept. 3, 1929
• The stock prices were extremely inflated due to
  consumer confidence
• The stock prices dominated the news

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1. Black Thursday

• October 23, 1929- stock prices fell greatly, but
  banking leaders warned the public not to worry
• A country as rich as the U.S. can withstand the
  shock of a 3 billion paper loss on the Stock
  Exchange in a single day
• President Hoover said the nations business was
  sound and ready to prosper

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2. Black Tuesday

• October 29, 1929
• Known as the Great Crash/ Black Tuesday
• Investors all over the country raced to get their
  money out of the stock market
• A record 16.4 million shares were sold
• The stock market would continue to fall and by
  November 13, there had been 30 billion lost

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B. The Ripple Effect of the Crash

• Initially the effects of the crash were only felt
  by investors
• Soon after, millions of Americans who never owned
  stock were effected

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Reasons for the Ripple Effect

• Risky loans hurt banks
• Consumer borrowing (banks called in their loans
  and customers didnt have to pay)
• Bank Runs
• Bank Failures (more than 5,500 in 3 years)
• Savings wiped out
• Cuts in production
• Rise in unemployment
• Further cuts in production

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1. Economic Contraction

• Contractionshrinking
• Depression- particularly long and severe
  contraction
• The Great Depression- the most severe economic
  downturn in the nations history
• Some historians say that the depression only
  lasted into the 30s after FDRs New Deal
  improves our economy
• Most historians say the depression lasted until
  WWII when the war spending helped bring us out of
  it

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2. Impact on Workers and Farmers

• With no money and little incentive (reason) to
  produce, factories throughout the country began
  to close
• Aug. 1931- Henry Ford closed his Detroit
  factories which put 75,000 people out of a job
• Farm prices, already low, continued to fall
• By 1932, more than 1/4 of the nations adult
  population was unemployed

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3. Impact on the World

• Nations depended on each other for trade,
  international bank loans, etc.
• Congress put high tariffs on foreign countries
  trying to protect American jobs and instead made
  it so the other countries couldnt pay back their
  war debts because they couldnt trade
• Other countries soon followed into Depression-
  especially after U.S. banks were unable to loan
  to Germany to help pay reparations

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C. Underlying Causes of the Depression

• The stock market crash on 1929 DID NOT cause the
  Great Depression
• Both the crash and depression were a result of
  deep underlying economic problems
• An unstable economy- uneven prosperity, no
  savings, etc
• Overspeculation- Stock boom was based on borrowed
  and optimism instead of real value
• Government Policies- Mistakes by the Federal
  Reserve as well as Laissez-faire leaders

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II. Social Effects of the Depression

• Many Americans thought the Great Depression would
  not last
• However, hard times continued and eventually
  spread to all levels of society

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A. Poverty Spreads

• Even professionals and white-collar workers lost
  jobs, had their lost when a bank closed, etc.
• People from all levels of society could be
  effected by the Great Depression

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1. Hoovervilles

• The hardest hit were the poor
• Many became homeless and moved into shanty
  towns that were called Hoovervilles
• The name was mocking the President (Herbert
  Hoover) whom people blamed for not resolving the
  crisis
• People would live in cardboard boxes, rusted-out
  car bodies, wooden crates, etc.

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2. Farm Distresses

• Low crop prices cut farm family incomes
• Could not pay their mortgages so they lost their
  farms to the banks, which sold them at auction
• Some protests shocked the nation such as when
  farmers dumped thousands of gallons of milk and
  destroyed crops to protest low prices

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3. The Dust Bowl

• Between 1931-1940, so much soil blew out of the
  central and southern Great Plains that the region
  became known as the Dust Bowl
• This was a major crisis as dust storms created by
  severe drought and farming practices carried away
  soil and deposited it far east leaving farmers
  without nutrient-rich soil to farm
• About 100,000 farmers were forced to migrate to
  California

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B. Poverty Strains Society

• Unemployment and the fear of losing a job caused
  great anxiety
• Suicide rates went up
• Some people starved or were suffering from
  malnutrition
• Families would line up by the garbage cans of
  restaurants waiting for scraps of food

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1. Stresses on Families

• People had to live in crowded conditions
• People gave up even small pleasures such as ice
  cream and going to the movies
• Married women were often not allowed to work
  because they were accused of taking a mans job

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2. Discrimination Increases

• White-Americans now needed a job (any job) and
  demanded the low-paying jobs occupied by blacks,
  Hispanics, or Asian-Americans
• The courts often didnt uphold minority rights
• Lynchings increased

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III. Surviving the Great Depression

• Most Americans tried to pull together to help one
  another out.
• Penny Auctions- when a farmer would have his farm
  foreclosed and put up for auction, his neighbors
  would wager only pennies to win and give the farm
  back to the original owner
• Very successful- some states suspended
  foreclosures on farms

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1. Young People Ride the Rail

• Teenagers would leave their families and look for
  jobs or adventure by hopping illegally on to rail
  road cars
• Some left because their family couldnt afford
  them, others to get away from despair
• They were called hobos and faced being
  arrested, injured, or even shot by angry farmers
  for taking food

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2. Seeking Political Solutions

• Radical ideas gained some popularity due to the
  harsh times
• For example, the Socialist presidential candidate
  received almost 900,000 votes in the 1932 election

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3. Depression Humor

• Used to get through their troubles
• Hoovervilles- shanty towns for the homeless
• Hoover blankets- newspapers used as blankets
• Hoover flags- pockets turned inside out with
  nothing in them
• Babe Ruth asked for a salary higher than
  President Hoover and joked, I had a better year
  than he did.

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A. Signs of Change

• Prohibition is repealed - the 21st Amendment
• In 1933, ended the failed social experiment and
  cut down on gangsters who profited from selling
  alcohol illegally
• The Empire State Building- offered a dramatic
  symbol of hope
• Was the worlds tallest building (102-story
  building)

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1. The End of an Era

• Al Capone was arrested
• Babe Ruth retired
• Henry Ford lost his popularity
• Charles Lindberghs baby was kidnapped and
  murdered which symbolized his fall from a
  national hero and shook the nation

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IV. The Election of 1932

• President Hoover tried to engineer a way to get
  the U.S. out of the Depression, but his strict
  adherence to his political beliefs greatly
  limited any accomplishments
• He believed in Laissez-faire
• Herbert Hoover (R) vs. Franklin D. Roosevelt (D)

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A. Hoovers Limited Strategy

• Hoover believed confidence is all that the
  economy was lacking
• He insisted that his administration and business
  leaders maintain public confidence and he
  believed the economic conditions would turn
  around soon

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1. Voluntary Action Fails

• Hoover believed voluntary controls by businesses
  in the U.S. were the best way to end the economic
  crisis
• Held a meeting with the top business leaders
• Promised to keep workers wages up voluntarily
• Didnt work as companies were forced to cut wages
• Hoover and the Republicans were soon blamed for
  not taking any action

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2. The Government Acts

• Despite common beliefs, Hoover did try to act
• His policies were just not strong enough or not
  the correct policy
• Helped create some jobs by constructing the
  Boulder Dam (later named the Hoover Dam)
• Hawley-Smoot Tariff - tried to protect domestic
  (American) industries with the largest import tax
  in U.S. history
• A complete backfire European nations also raised
  their tariffs and international trade diminished
  greatly

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3. Hoovers Unpopularity Grows

• Hoover insisted state and local governments
  should should handle relief
• His refusal to provide direct aid brought a
  bitter public reaction and negative publicity
• He was blamed, sometimes unfairly, for everyones
  problems
• Side-note-- John Maynard Keynes (economist)
  argued that massive government spending could
  turn around the slumping economy

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4. Veterans March on Washington

• Low point for President Hoover (1932 summer)
• 20,000 jobless WWI veterans and their families
  encamped in Washington, D.C.
• Called themselves the Bonus Army
• Wanted payment of a pension that had been
  promised for 1945
• The Bonus Army faced their own countrys guns,
  tanks, and tear gas
• This lasting image helps defeat Hoover in the
  election

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B. A New Deal for America

• I pledge myself to a new deal for the American
  people, pledged Franklin Delano Roosevelt (FDR)
• FDR- married to Eleanor (a very influential 1st
  lady who happened to be the niece of Teddy)
• Graduated from Harvard
• Worked in a law firm, the NY Senate, and as
  Assistant Secretary of the Navy
• Came down with polio in the 1920s and could
  never walk again without help
• Planned to change the role of the Federal
  Government

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C. The Election of 1932

• The campaign was more than a campaign between 2
  men, it was a campaign between 2 philosophies of
  government
• This election would prove to change the American
  government forever
• FDR won the presidency by a huge margin
• People wanted out of the Great Depression and FDR
  provided hope and action