HIS 112Chapter 26

The Shaken Dream and the New Deal, 1929-1933

Overview

Country was optimistic in 1928 when Herbert Hoover was elected as president

Hoover knew there were some weaknesses in the economy and some divisions in society but thought he could fix all that

When the stock market crashed in 1929, Hoover and everyone else was shocked

This crash affected the whole economy and resulted in the Great Depression

Americans couldn’t understand why people were going hungry when farmers bins were overflowing, people were out of work when they were willing and able, and factories closed when they could function

Americans’ belief that if you work hard, you will succeed, was shaken

They looked to Herbert Hoover for help, and he did little

So they didn’t re-elect him in 1932 Franklin D. Roosevelt, a Democrat,

became president

The New Day, 1929-1933

This was the name given to the Hoover Administration

His cabinet was comprised largely of wealthy businessmen who believed in the old ways and in a capitalist utopia; they didn’t want innovation

Hoover did have a group of young advisors called the New Patriots who felt science and efficiency could be applied to government

There was some business optimism: a new building called the Empire State Building was being built; when this office building was completed in 1931, many offices were left vacant

Hoover believed that individuals were responsible for themselves

Government should have only a limited role in people’s lives

This thinking did not match the reality

The Crash and the Great Depression The stock market crashed on 29 October

1929 There had been warning signs; however,

Hoover felt the stock market’s ills could be quarantined from a generally healthy economy

Causes: Increasing weakness of the economy of the 1920s

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Underconsumption1.___________________________________

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Unequal distribution of income1.

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Large Corporations____________________________________

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Speculation in the stock marketStock purchases made with borrowed moneyPeople bought stock “On Margin”

Put 10% of purchase price down When stock goes up, sell some and pay off what is

owed Brokers’ loans totaled $6 billion by the summer of

1929

International economic troubles U.S. had loaned lots of money to Europe after World

War I These loans stopped at the end of 1920s Europeans could not borrow more money and they

couldn’t sell goods easily in U.S. because of tariffs They bought less from U.S. and defaulted on loans The depression became international in scope

Government policies and practicesLack of federal regulation to curb speculation

in the marketFederal Reserve had easy-credit policies and

charged low discount rates

Little or no economic information availableNo computers, for example, to give instant

information