NOTES on the Great Depression

Causes of the Depression1. uneven distribution of wealth2. Stock market mistakes

a. Speculation: buying cheap stocks hoping they will improve

b. Buying on Margin: borrowing money from broker to buy stocks

i. charge interest!ii. Stock must BOOM to make any $

3. Overproduction… supply exceeds demand price dropa. Mass production = too efficient

4. Buying on Credita. Farmers buy

equipment on credit

b. Prices drop Cannot pay debt

c. Farm foreclosures!

Farms Foreclosed

5. Panic! Stock Market Crasha. Black Tuesday

i. 16.4 million shares SOLD (Oct 29th, 1929)

ii. Loss of $30 billion

6. Bank Runs – everyone withdraws $a. WORLD’s biggest lender fallsb. Stop lending to Europe Europe cannot afford to buy American products c. Europeans cannot sell goods in US … cannot pay back war debts

European factories fail

Europe cannot repay loans OR buy

Amer. products

US stops loans to Europe

Great Depression – severe economic decline

1. Widespread povertya. Factories close – 25% unemployedb. Hoovervilles = shantytowns for

homeless

2. gross national product (total value of goods and services a country produces) = cut in half

Welcome to Hoovervilles

“Prosperity cannot be restored by raids upon the public treasury”

Herbert Hoover’s response (R President)1. Helps business … not PEOPLE

a. Opposes welfare for poor

2. Bonus Army - 20,000 unemployed veterans marched on Washington

a. Want war pensionsb. Army burns camps – use tanks and tear gasc. Hoover = horrified … but takes responsibility

3. Smoot Hawley Tariff – protectionist tax on foreign goods

a. Intended to help companiesb. BUT, hurts consumer

4. Prohibition repealed (industry & jobs)

Stories of Survival • Nothing was wasted

the “depression generation” – even those who

recovered enough to live a very comfortable life, would continue to pinch pennies as if financial ruin were just around the corner

– People pulled together and helped one another

– Humor to cope

“When Wall Street took the tail spin, you had to stand in line to get a window to jump out of”

Dust bowl – drought and dust storms in plains states