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The Beginning of the Great Depression in America
1920's had been a period of good economic times Tues. Oct. 29th, 1929 - NYC Stock market
crashed, causing a depression that would last until 1942
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Industries in Trouble Some industries (textiles, steel, &
railroads) barely made a profit due to foreign competition and new types of transportation
WW I wartime needs were no longer in demand
Boom industries of the 20’s (autos, construction, & consumer goods) began to weaken
The housing industry began to decline which affected other industries such as building materials, appliances, new furnishing, etc.
Mechanization of Industry – machines doing jobs of workers – more goods – less jobs
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in 1920's U.S. Economy was based on the productivity – purchasing power - employment cycle
for many goods to be produced , purchasing demand had to be there: this resulted in high employment and a healthy economy
between 1924-27, U.S. productive capacity doubled but it was due to technological innovation electricity and mechanical advances made for better production, but no new jobs were added to the economy
so more consumer goods were available, but there weren't enough people to buy them (OVERPRODUCTION)
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Farmers During WW I farmers planted more crops & took
out loans to buy land & equipment After WW I agriculture suffered in the 1920’s
since there was now a lack of international demand for food crops and prices dropped by 50%.
To compensate, farmers boosted production which cause the prices to further drop
Farmers who went into debt lost their farms and had their property seized.
Many rural banks, who had loaned $$ to farmers, began to fail
Although Congress twice passed a bill which would called for federal price support, President Coolidge vetoed it commenting, “Farmers have never made money. I don’t believe we can do much about it.”
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Consumers living on credit
By the late 1920’s Americans were buying less due to rising prices, stagnant wages, uneven distribution of income and too much credit
Production of goods expanded much faster than wages
People began living beyond their means, often buying goods on credit
Businesses encouraged consumers to pile up debt which people found difficult to pay off
Faced with debt, people began to buy less
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Uneven Distribution of IncomeUneven Distribution of Income 1929, the wealthiest 5% of
American families took in nearly a third of the nation’s income
The poorest 40% of the population earned just over a tenth of the national income
this middle class depended on their salaries and when productivity declined they lost their jobs
and because of low savings, they had to cut back on their purchases
this decline in consumption among the middle class ruined the whole country
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The stock market: the public invests in
cos. by purchasing stocks; in return for this they expect a profit
because of the 1920’s booming economy, money was plentiful, so banks were quick to make loans to investors
investors only had to pay for 10% of the stock's actual value at time of purchase› this was known as
BUYING ON MARGIN, and the balance was paid at a later date
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this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck
Due to this buying & selling, stock value increased (Ex: G.E stock $130 $396/share)
this quick turnover didn't aid companies. they needed long term investments so they could pay bills (stock value was like an illusion)
unscrupulous traders would buy and sell shares intentionally to inflate a given co.'s stock value
all of this gave a false sense of security/confidence in the American market
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Black Tuesday Black Tuesday (10/29/1929)(10/29/1929)
beginning in Oct. 1929, investors’ confidence dropped, leading to a market collapse
all tried to sell at once and the bottom fell out of market = panic selling… (many bankruptcies as banks called in loans)
only a tiny minority of people traded on the stock exchange, but they possessed vast wealth, and the crash had a ripple effect on the economy
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Financial Collapse – Run on Banks
Panic!! People rushed to withdraw their money from banks
Banks could not cover the withdrawals since banks had also invested and lost money in the stock market
1929 – 659 banks closed 1933 – around 6,000 banks, ¼ of the
nations banks had failed The federal gov’t did not protect or
insure bank accounts at this time
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Businesses fail- people suffer 1929 - 1932
85,000 businesses went bankrupt Workers lost jobs Unemployment went from 3% in
1929 to 25% by 1933 One out of every 4 workers did not
have a job Those who had jobs often had to
accept pay cuts and reduced hours
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One of the lucky ones In the months before the
crash, shrewd stock market speculators began to unload their stocks and take profits
Joseph P. Kennedy, father of John F. Kennedy, sold early and did very well.
It is said that he knew it was time to get out of the market when he received stock tips from a shoe-shine boy.
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Worldwide shock waves Europe also suffered during this
period European countries faced high debt
payments from the war to the US Germany had to pay war reparation
after being defeated Trade between Europe and the US
suffered To encourage European nations to
buy US goods, Hoover proposed a MORATORIUM - a temporary postponement of debt and war reparation payments
Before this happened Euro. countries went off the gold standard which decreased the value of the payments they did make to the US
European banks defaulted on payments to US banks
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TARIFF WARS
In 1930 Congress passed a high tariff (SMOOT HAWLEY) to protect U.S. industry (hoped to stimulate purchasing of U.S. goods)
this turned out to be a fatal error...
Congress did not understand that the world had become a GLOBAL ECONOMY
in retaliation other countries passed high tariffs and no foreign markets purchased American goods, so U.S. productivity decreased again
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Herbert HooverPresident 1928 – 1932 Republican
“business is on a sound and prosperous basis” 10-25-1929
“Any lack of confidence in the economic future…is foolish” 11-29 Hoover
Know as “the Great Engineer”
Never held an elected office
Born poor – succeeded with brains and hard work
Great humanitarian Rugged Individualism -
belief that individuals and private agencies should care for the nations poor, sick, etc.
Feared government handouts would weaken people’s self respect
Unprepared to deal with the depression
Blamed by many for the depression
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Hoover – unable to deal with the depression
Tried to restore confidence
Made it easier to borrow money
Began a public works program
Did not believe in providing direct relief
Banks closed and people lost their money
Unemployment skyrocketed
Homeless people called newspapers – Hoover blankets and a turn out empty pocket a Hoover flag
As people lost their jobs and homes they lived in shacks which they called Hoovervilles
Cardboard shack
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Farmers retaliate
Overproduction during WW I caused farm prices to dropped
Farmers dumped milk and burned crops in an attempt to raise farm prices
Used force to try to stop foreclosures
If you refused to leave your farm, it could be tractored - torn down On the left, Mrs. Wilson’s
grandfather, an Illinois farmer dumping milk. 1932
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Hoovervilles
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Hoover takes action - finally He gradually softened his position on gov’t
intervention By 1930 he directed federal funds into
projects such as the construction of Boulder Dam to jump-start the economy and add jobs
Federal Farm Board was designed to help raise crop prices
Glass-Steagall Banking Act increased bank reserves and made bank loans easier to get
Federal Home Loan Bank Act lower mortgage rates and allowed refinancing to avoid foreclosure
Reconstruction Finance Corporation provided emergency financing to banks, life insurance companies, railroads and other large businesses
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Too little – too late
Hoover believed the money would trickle down to the average citizen through job growth and higher wages
Critics believed it only helped corporations
The poor still needed direct relief Hungry people could not wait for
money to trickle down to their tables
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Hoover and the Bonus Army World War I veterans had been promised a
cash bonus payable in 1945, since 1931, they had been allowed to borrow money on the payment
They came to Washington D.C. in 1932 to support a bill that would pay them the bonus now
The bill did not pass and when the Bonus Army and their families refused to leave the shantytown they were living in, Hoover took drastic measures
The army, led by Douglas MacArthur and his aide, Dwight Eisenhower, gassed and drove the veterans from Washington D.C.
Americans were stunned & outraged at the gov’t’s treatment of veterans
Big trouble when the gov’t attacks it’s own citizens
An 11 month old baby diedAn 8 yr. old was blinded
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1932 ELECTION
1 out of 4 was unemployed…
nat'l income was 50% of what it had been in 1929
Republicans nominated Hoover no hope
winner by a landslide = FRANKLIN DELANO ROOSEVELT (Dem - N.Y. governor)
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Franklin D. RooseveltPresident 1932 – 1944 Democrat
“We have nothing to fear but fear itself” FDR
Married Eleanor Roosevelt, niece of Teddy Roosevelt
Stricken with polio in 1921 – paralyzed the rest of his life
Many believed his political career was over
1928 elected governor of New York
Elected president in 1932 Promised the American
people a “New Deal” First Act – declaring a bank
holiday Used the “fireside chat” to
keep the public informed Government engaged in
massive spending projects to improve the economy
Elected for 4 terms as president
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Eleanor and FranklinShe will become his legs often traveling and speaking on his behalf
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Shantytowns sprung upwhen people lost theirhomes. Later they willbe called Hoovervilles.
Hardship & Suffering
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The Unemployed in cities – marching, hanging around, waiting in a soup kitchen line
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African and Latino Americans
Unemployment rates were even higher and wages lower
Racial violence occurred 24 African Americans were lynched
in 1933 Latinos in the southwest were also
targets Unemployed whites demanded
that Latinos be deported Thousands returned to Mexico
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Mexican woman and Black farm family
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Rural Areas - Losing your property
One advantage – food, that is until you lose your farm.Farmers who lost their farms became tenant farmers & barely managed. Many left and moved west.
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The Dust Bowl – drought and over production of the land
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Oakies - Looking for a better life in California Followed Route 66 to California
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The automobile was very important
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Men in the streets looking for work
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Riding the rails
2 million men left their families and wandered the country
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The federal gov’t did not provide Direct Relief to the poor
Some cities and charities did provide some relief
In New York, the weekly payment was $2.39 per family
Well below what a family needed
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Women & children
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Social and Psychological effects
People were demoralized Suicide rate went up by 30% More people were admitted to mental
hospitals People stopped going to the doctor & dentist Dreams of college, marriage, raising families
were put on hold Families helped each other & showed
kindness to strangers People developed habits of saving and
thriftiness
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The Ugly Facts 85,000 businesses failed 6,000 banks closed 400,000 farms were lost because payments
could not be made 12,000,000 people were out of work 13% of working women were the only source
of income for the family By 1932, between 1 and 2 million Americans
were homeless At least 25,000 families were nomadic,
looking for work Malnutrition cases rose from 18% to 60% by
1931 5,000 schools closed due to lack of funds $12.00 – the monthly Red Cross relief
payment