The Great Depression 1928-1932

Learning Outcomes:1.Discuss the weaknesses of the

economy in the 1920’s2.Explain how the stock market

crash contributed to the coming of the Great Depression

3.Describe how the Great Depression spread overseas

Key Terms and PeopleHerbert HooverspeculationBlack Tuesdaybusiness cycleGreat DepressionHawley-Smoot Tariff

Prosperity Hides TroublesConsumption went up

Gross national product went up

Stock market went up

Bull market

Optimism Sweeps Hoover to “W”RepublicanRan against Alfred E. Smith—lost because he was Catholic

Problems Plague the Agricultural SectorSummary

During the war there was a high demand of farming good throughout the country. Once the war was over demand for those good went down and sent the rural community spiraling into a depression.

Farmers bought costly equipment to keep up w/ the demand of WWI.

Took on huge debtPost WWI demand

went downRural depression,

natural disastersLived off credit from

month-to-month

Wealth is Distributed UnevenlyWages and disposable

income rose in the 20’s

As wages rose gradually, worker productivity increased astronomically

Rich became richer and workers became less poor—economic problems

Income distribution chart p. 369

The Stock Market CrashesWhat was the

basis for soaring stock prices during the 1920’s?

What happened when investors lost confidence in the stock market?

Too much money was being poured into stock speculation

Black Thursday—nervous investors started to sell stocks

Black Tuesday—16 million shares were sold

The Banks CollapseSummary

After the stock market crashed people became fearful and tried to get their money from banks, but after some flawed policies put in by the gov’t the banks ran out of money.

Frightened depositors feared for their money and tried to withdraw it from their banks

Misguided monetary policy—cut interest rates to stimulate economic growth

The “Fed” discouraged lending—too little money in circulation

Businesses Close & Unemployment RisesCollapse of stock

prices and reduced consumer spending led to business failure

Production cutbacks, maintain price levels, layoffs, and reduced payroll

By 1933, 25% of Americans had lost their jobs

Tariffs Add to WoesThe gov’t moved to

protect American products from foreign competitors

Hawley-Smoot TariffEuropean countries

retaliated and passed tariffs of their own against U.S. goods

Helped destroy international trade

The Depression Goes GlobalCopy diagram on

top of p. 372

European problems of reparation payments, war debt payments, and international imbalance of trade had already created a shaky economic structure

Germany ceased payments—GB/France suspended payments

Review Questions1. Why did many farmers face economic

difficulties during the 1920’s?2. Why did the uneven distribution of

wealth contribute to the economic troubles of the U.S?

3. What problem did the availability of easy credit create?

4. How were the stock market crash and the collapse of the banking system related?

5. How did these events affect the nation’s workers and businesses?

Learning Outcomes1.Discuss how Hoover’s initial

conservative response to the Great Depression failed.

2.Explain the changes in the President’s policies as the crisis continued.

3.Describe how Americans reacted to Hoover’s relief programs.

Key Terms and PeopleLocalism Reconstruction Finance Corporation

trickle-down economicsHoover Dam Bonus ArmyDouglas MacArthur

Cautious Response to Depression FailsSummary

President Hoover attempted to restore the nation’s economy by changing his “hands off” approach through volunteerism and gov’t policies to help kick start the economy and end the depression.

Hoover asked business and industrial leaders to keep employment, wages, and prices at current levels.

Called for gov’t to reduce taxes, lower interest rates, create public-works programs

Requested the rich give to charities

Volunteerism Fails to Bring Relief Relied too much on

voluntary cooperationHoover was cautious to

encourage…not legislate

Volunteerism did NOT work

Localism—no financial or human resources to successfully work

The crisis demanded decisive federal action

Hoover Adopts More Activist PoliciesThe association of the

President’s name w/ suffering and want indicated Americans’ feelings for him

Reconstruction Finance Corporation (RFC)

Trickle-down economicsDid NOT work!Hoover Dam Project—

brought much-needed employment to the SW

Some Urge Radical ChangeSome Americans

thought the answer was to reject capitalism and accept socialism/communism

These ideas were rejected

Americans never lost faith in their country

Bonus Army Marches on WashingtonBonus Army—war

vets seeking bonus Congress had promised them from WWI

Adjusted Compensation Act—provided lump-sum payment to vets

Vets wanted early payment, but Hoover vetoed bill

Hoover Orders the Army OutGeneral Douglas

MacArthur, Dwight Eisenhower, and George Patton

Marchers were tear-gassed and many were badly injured

In 1932, Americans were ready for a change in the Oval Office.