The Great DepressionChapter 18
Objective 9.1 Elaborate on the cycle of boom and bust in the 1920s & 1930s
Election of 1928Prohibition
Herbert HooverRepublican
Pro-Prohibition
Alfred E. SmithDemocrat
Anti-Prohibition
Election of 1928
Calvin Coolidge declined to run for a second term.
Democrats nominated Al Smith (1st Catholic nominated by a major American party)
Republicans nominated Herbert Hoover
The Campaign “wet’s vs. dry’s” Smith’s Catholicism
was made an issue by Hoover supporters—not Hoover.
Big boost for Republicans= the prosperity of the 1920’s.
The Bull Market of the 1920’s 1920’s “Bull
Market” convinced Americans to invest in stocks.
“Buying on margin”- investors could purchase stocks with only a 10% down payment.
If stock prices fell, stockbrokers could issue a “margin call”.
Stock Speculation- because of the bull market, many investors bid up the price of stocks without considering the company’s earnings or profit.
The Great Crash Bull market existed because
of so many new customers – it began running out of new customers
Investors started selling Stockbrokers made margin
calls People began frantically
selling stock Black Tuesday
› Prices took the steepest dive
Result: the crash undermined the economy’s ability to hold out against other problems
Bank Troubles 2 Problems
› Loaned money to speculators
› Invested deposited money in the stock market
Bank Runs› Depositors began
withdrawing all of their money
Federal Reserve
Instead of raising interest rates to cut inflation, the FED kept the rates low› Encouraged banks to make risky loans› Led businesses to borrow more to expand
At the last minute – Wrong Time!!› the FED made another mistake by
raising interest rates
Other Problems Income Distribution
› Most Americans dependent on installment plans for goods
› Debt became high› Cut consumer
spending› Production then
slowed
Overproduction- key cause of the Depression.› Technology enabled
businesses to produce more
› Hawley Smoot Tariff Highest level ever Damaged export sales
› US banks did not lend to foreigners to buy American goods
Depression Worsens Massive Unemployment
› 30,000 companies out of business
Soup Kitchens & Bread lines
Shantytowns (aka Hoovervilles)› Communities of
homeless Hobos
› Homeless wanderers looking for food, work & shelter
HOOVERVILLES
The Dust Bowl
Term used to describe the Great Plains during the Great Depression
1932 Drought Winds whipped dust like snow over the crops & livestock
Oakies› Farmers who gave up their farms & headed
to California
The Dust Bowl
Entertainment, Art & Literature
Escape through Movies & Radio
Marlene Dietrich & Greta Garbo
Walt Disney – Snow White & Seven Dwarfs
Gone with the Wind
Soap Operas – “Guiding Light” – radio
Entertainment, Art & Literature
Grant Wood – American Gothic
John Steinbeck – Grapes of Wrath
William Faulkner – The Sound & the Fury
Margaret Bourke-White - Photographer
President Hoover’s Response to the Great Depression Hoover was a self-
made man (millionaire)
Started poor (orphan) made his way to college.
Believed “rugged individualism” would keep America moving forward.
1930-Organized a series of conferences with business leaders
Business leaders promised to keep businesses open and keep wages stable.
1931-Business leaders broke promises.
Hoover’s Response
Public Works Projects› Government funded
building projects.› How do you pay for
it? Raise taxes? Run a budget deficit?
› Ultimately, government did not spend enough to create many jobs.
Hoover’s Response› National Credit
Corporation (NCC) IN 1931.
› Set aside a pool of money to allow troubled banks to keep lending.› Failure—not enough
money to handle the massive problems.
Reconstruction Finance Corporation› Set up by Federal
government to make loans to banks, railroads & agriculture (1932).
› Lent $238 million to 160 banks, 60 railroads, 18 banks.
› Did not spend enough
Hoover and direct relief
Relief- money given directly to the poor by the government.
Hoover did not support this idea.
He believed that only state & local governments should do this—not the federal government.
1932—Congress passed “Emergency Relief and Construction Act”
Hoover reluctantly signed
1st time US government supplied direct relief funds.
Revolts & Marches
Hunger Marches› Led by American
Communist Party Farmers Revolt
› Destroyed crops to raise the price
Bonus Marchers› Veteran bonuses from
WWI› Veterans marched on
Washington = Bonus Army