1920s

Angelina,Becky,

Jeremy,Terry&Zizy

Chapter22‐Period4

5/25/2010

TheGreatDepressionBegins

THE GREAT DEPRESSION BEGINS

TheNation’sSickEconomy

*Astheprosperityofthe1920s,severaleconomicproblemsgrippedthenationheavily.

EconomicTroublesontheHorizonIn1920s,asmallnumberofAmericansbecamewealthy,butthe

majorityAmericanscouldnotearnadecentlife.Theeconomistsprovidedthreeseriousproblemsthatcouldthreateneconomicprosperity.

HooverTakestheNation

VS. In1928,HerbertHoover(RepublicanP.)andAlfredE.Smith(DemocracyP.)wererunningforthepresidency.Duringtheelectionof1928,Hooverdeclaredonemessagethathelpedhimtogetanoverwhelmingvictory.ThemessagewasclearandmostofAmericanswerehappywithRepublicanleadership.Atthattime,agreatnumberofpeoplewantedtobecomewealthy;therefore,theyinvestedblindlyinthestockmarketwithnobasicknowledgeaboutstockmarket.Peoplewereengaginginspeculation.Theyboughtstocksandbondsonthechanceofaquickprofit,whileignoringtherisks.Manypeoplealsobeganbuyingonmargin.Witheasymoneyavailabletoinvestors,therefore,thenumberofmillionairesincreasedrapidly.However,inthebadsituation,whenthepricewentdownsuddenly,peoplewhohadboughtmargincouldnotpayofftheloans.Therefore,theDowJonesIndustrialAveragewasthewidelyusedbarometerofthestockmarket’shealth.Someeconomitshadwarnedoftheweaknessessintheeconomyin1929.Thegovernmentalsodidnottakecarethisverymuch.

*Thechartsbelowshowedhoweasytheinvestorsbecamethestockbrokers.

Borrowing to Purchase Stocks as a Percentage of Total Consumer

Debt

1900 1 percent 1910 2 percent 1920 3 percent 1929 5 percent 1933 2 percent

TheStockMarketCrashes InearlySeptember1929,stockpricespeakedandfellrapidly.Someinvestorsquicklysoldtheirstocksandpulledout.TheBlackTuesday(October29,1929)wasthedaywhenthestockmarketcrashedterribly.Investorswhocouldnotselltheirstockswerestuckwithhugedebtsbecausemostofinvestorsboughtstockswithcredit.Whenthestockmarketcrashed,itmarkedthebeginningofTheGreatDepression(1929‐1940).TheGreatDepressioncausedalotofeffect:peoplelosttheirjob,theeconomywentdowndramatically,andbankingsystemfailed.Civiliansrealizedthattheyhadtotakeouttheirmoneyfrombanks.Duetothisaction,itcausedtheeconomybecomesworse.TheGreatDepressionalsoaffectedtheothercountries.ThetradingbetweentheUSAandEuropeancountrieswerecorruptedimmediatelybecausetheDepressionlimitingAmerica’sabilitytoimportEuropeanproducts.Tosolvetheproblem,in1930,CongresspassedouttheHawley‐SmootTariffAct,whichestablishedthehighestproductivetariffinUShistory.In1929,PresidentHooverencouragedAmericanstoremainconfidenceandcalmnessabouttheeconomy.

Loans by Stock Brokers

1927 $3.5 billion

1929 $7 billion

*October24,1929:ThefrontpageoftheBrooklynDailyEagle,publishedonthedayoftheinitialWallStreetCrash,knownasBlackThursday(Hulton/GettyImages)

*October24,1929,NewYork,US:PanickedstocktraderscrowdedoutsidetheNewYorkstockexchangeonthedayofthemarketcrash(Bettmann/Corbis)

HardshipandSufferingduringtheDepression*DuringtheDepression,Americansdidwhattheyhadtodotosurvive.

Thecountry’sconditionwasharsh.Incities,peoplelosttheirjobsandhouses.Asaresult,shantytownsstartedtoappear.Soupkitchensofferingfreeorlowcostfoodandbreadlines,orlinesofpeoplewaitingtoreceivefoodfromcharitableorganizationwereseeneverywhere.AfricanAmericansandLatinossufferedheavyviolence.MexicanreturnedtoMexicoeitherbyforceorleftvoluntarily.Inthecountryside,theconditionwasalittlebitbettersincesomefarmerscouldgrowfoodfortheirownfamily.However,somefarmerslosttheirlandorthelandownerstookbacktheirland,therefore,tenantfarmingwasfavoredinordertosurvive.DuetotheDustBowl,somepeoplelefttheirlandtomovetoWesternregion,andmostofthemmovedtoCalifornia.Thedepressionaffectedthesocietyheavily.Thegovernmentdidnotprovidedirectrelieftothecitizenship,sothelifebecameharsherthanever.

*November161930,Chicago,US:NotoriousgangsterAlCaponeattemptstohelpunemployedmenwithhissoupkitchen,BigAl'sKitchenfortheNeedy(Bettmann/Corbis)

Mentriedtofindjobstosupportfamilies.Somemen,whousedtosupportandworkedforthefamily,becamedepressedwhentheycouldnotfindanyjob.Somemenlosthopesandtheyabandonedtheirfamilies.Ontheotherhand,womentriedtodoanyjobthatcouldhelpthefamilyandsavedasmuchmoneyaspossible.However,theyalsofacedresentmentfromthesociety,therefore,womenstartedtolosejobs.Becauseofthat,manywomenstarvedtodeath.Children’spoordietledtoserioushealthproblems.Inaddition,schoolsshutdown,soteenagersstartedtofindjobandworked.Someteenagersevenlefttheirownfamiliesandlivedbythemselves.Theconditionwastooharshthatagreatofnumberpeoplelosthopes,dreams,anddecidedtocommitsuicide.Theotherpeopledhadcompromisesthataffectedthemalotinordertosurvive.FinancialsecuritybecametheprimarygoalinlifeofmanyAmericans.

PrimarySource*ThreeciviliansexpressedtheirfearsduringtheGreatDepressiontimeatSenateCommitteeonManufactures,1932.

25 year old waitress

43 year old housewife

54 year old molder

Chief need Money Money Money Meaning of

money Joys the rich

have Chance to

educate children No more relief

orders

Chief fear Loss of job Poverty Things will never get

better Does

government owe you a living?

No No Thinks U.S. owes all a job

Who is responsible for Depression?

The bankers and building

and loan men Drift away

from church Capitalism's

greed

Would you farm if you had land?

Yes, if I knew how No No

Has religion helped you?

When things were worst Almost by itself No

Do you want government to plan the future?

Thinks government can

plan without restricting

Will abide by the plan that

offers a better day

Wants help not advice

HooverStruggleswiththeGreatDepression*PresidentHoover’sconservativeresponsetotheGreatDepressiondrewcriticismfrommanyAmericans

AnalysisHoover’sResponses: Overall,HerbertHoover’sresponsestotheGreatDepressionmainlybasedonhisconservativephilosophy.HooverthoughtthegovernmentwouldonlyencouragecooperationandAmericanshouldsucceedthroughhis/herowneffort.AfterthestockmarketcrashedonBlackTuesday,Hooverusedhisphilosophy,andthenrespondedtotheciviliansclearly.Hoover’sresponseseeminglymadeagreatshockandfrustratedsufferingAmericans.Inaddition,Hoover’spoliticalphilosophycausedhimtotakecautiousstepsforrecoveringtheeconomicdepression.Hoover’scautiousstepsdidnotmakemuchofadifference.Theeconomywasstillshrinking,andtheunemploymentwasstillrising. BoulderDamwasamassiveprojectthatprovidingelectricity,floodcontrol,andaregularwatersupplytoWesternstates.BoulderDamwasamodelofencouragingcooperationbythefederalgovernment.

ConsequencesofHoover’sResponses:Hoover’sresponsesmadethepoliticaltideturnedagainstHoover

andtheRepublicans.Whentheeconomicdepressionincreased,in1930,DemocracytookadvantagestowinmoreseatsinCongress.ThecitizenshipalsocriticizedHooverwhenHooverrefusedtosupportdirectreliefforpoorfarmersandcivilians.Asaresult,poorfarmersandpoorciviliansexpressedtheirangerinmanyways.

HooverTakesAction Finally,Hoovertriedtoformsomenewcooperation(FederalFarmBoard,NationalCreditCorporation)andpassedsomeactsout(FederalHomeLoanBankAct,ReconstructionFinanceCorporation,Glass‐SteagallBankingAct)withthehopetorecoverthecountry’seconomyrapidly.

Whentheseactspassedout,theyalsomadesomeneweffectsthatwerestoppingthedecreasingofeconomyinshorttimeofperiod.However,thenumberofunemploymentandthenumberofbankfailureswerestillrising.Thefederalgovernmentrealizedthiswastoolatetorecovertheeconomy.

*UnemploymentasPercentageoftheLaborForceandBank

Failures.

Unemployment as Percentage of the Labor Force

1900 5 percent 1910 5.9 percent 1920 4 percent 1925 4 percent 1929 3.2 percent 1930 8.7 percent 1932 23.6 percent 1933 24.9 percent 1934 21.7 percent 1935 20.1 percent

GassingtheBonusArmyGassingtheBonusArmywasthenextproblemthatHooverfacedand

it sealed Hoover’s political fate. Soldiers who fought in WWI went toWashingtonDC.Theywantedthegovernmentpaidmoneyimmediatelyfortheir achievement inWWI ($500/per soldier). They called themselves theBonus Expeditionary Force, or the Bonus Army. Hoover showed hisdisagreement strongly by sending his troops to get rid of veterans. ThisactionoutragedAmericansandfadedHoover’simageinAmericans’mind.

Bank Failures 1929 659 1930 1,352 1931 1,456 1932 2,294 1933 5,190

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