Crash and Depression 1929 1933 I The Stock

Crash and Depression (1929 -1933)

I. The Stock Market Crash • October 29, 1929 • The era of “wonderful prosperity” had come to an abrupt end as the New York Stock Exchange tumbled

A. The Market Crashes • The Dow Jones Industrial Average (an average of stock prices of major industries) was at an all-time high on Sept. 3, 1929 • The stock prices were extremely inflated due to consumer confidence • The stock prices dominated the news

1. Black Thursday • October 23, 1929 - stock prices fell greatly, but banking leaders warned the public not to worry – “A country as rich as the U. S. can withstand the shock of a $3 billion paper loss on the Stock Exchange in a single day” • President Hoover said the nation’s business was sound and ready to prosper

2. Black Tuesday • October 29, 1929 **** • Known as the “Great Crash”/ “Black Tuesday” • Investors all over the country raced to get their money out of the stock market – A record 16. 4 million shares were sold • The stock market would continue to fall and by November 13, there had been $30 billion lost

B. The Ripple Effect of the Crash • Initially the effects of the crash were only felt by investors • Soon after, millions of Americans who never owned stock were effected

Reasons for the Ripple Effect • Risky loans hurt banks • Consumer borrowing (banks called in their loans and customers didn’t have $ to pay) • Bank Runs • Bank Failures**** (more than 5, 500 in 3 years) • Savings wiped out • Cuts in production • Rise in unemployment • Further cuts in production

1. Economic Contraction • Contraction=shrinking • Depression- particularly long and severe contraction • The Great Depression- the most severe economic downturn in the nation’s history – Some historians say that the depression only lasted into the 30’s after FDR’s New Deal improves our economy – Most historians say the depression lasted until WWII when the war spending helped bring us out of it

2. Impact on Workers and Farmers • With no money and little incentive (reason) to produce, factories throughout the country began to close – Aug. 1931 - Henry Ford closed his Detroit factories which put 75, 000 people out of a job • Farm prices, already low, continued to fall • By 1932, more than 1/4 of the nation’s adult population was unemployed

3. Impact on the World • Nations depended on each other for trade, international bank loans, etc. • Congress put high tariffs on foreign countries trying to protect American jobs and instead made it so the other countries couldn’t pay back their war debts because they couldn’t trade • Other countries soon followed into Depressionespecially after U. S. banks were unable to loan $ to Germany to help pay reparations

C. Underlying Causes of the Depression • The stock market crash on 1929 DID NOT cause the Great Depression • Both the crash and depression were a result of deep underlying economic problems: – An unstable economy- uneven prosperity, no savings, etc – Overspeculation- Stock boom was based on borrowed $ and optimism instead of real value – Government Policies- Mistakes by the Federal Reserve as well as Laissez-faire leaders

II. Social Effects of the Depression • Many Americans thought the Great Depression would not last • However, hard times continued and eventually spread to all levels of society

A. Poverty Spreads • Even professionals and white-collar workers lost jobs, had their $ lost when a bank closed, etc. • People from all levels of society could be effected by the Great Depression

1. “Hoovervilles” • The hardest hit were the poor • Many became homeless and moved into “shanty towns” that were called “Hoovervilles” – The name was mocking the President (Herbert Hoover) whom people blamed for not resolving the crisis • People would live in cardboard boxes, rusted-out car bodies, wooden crates, etc.

2. Farm Distresses • Low crop prices cut farm family incomes • Could not pay their mortgages so they lost their farms to the banks, which sold them at auction • Some protests shocked the nation such as when farmers dumped thousands of gallons of milk and destroyed crops to protest low prices

3. The Dust Bowl • Between 1931 -1940, so much soil blew out of the central and southern Great Plains that the region became known as the Dust Bowl • This was a major crisis as dust storms created by severe drought and farming practices carried away soil and deposited it far east leaving farmers without nutrient-rich soil to farm – About 100, 000 farmers were forced to migrate to California

B. Poverty Strains Society • Unemployment and the fear of losing a job caused great anxiety – Suicide rates went up – Some people starved or were suffering from malnutrition – Families would line up by the garbage cans of restaurants waiting for scraps of food

1. Stresses on Families • People had to live in crowded conditions • People gave up even small pleasures such as ice cream and going to the movies • Married women were often not allowed to work because they were accused of taking a man’s job

2. Discrimination Increases • White-Americans now needed a job (any job) and demanded the low-paying jobs occupied by blacks, Hispanics, or Asian-Americans • The courts often didn’t uphold minority rights • Lynchings increased

III. Surviving the Great Depression • Most Americans tried to pull together to help one another out. • Penny Auctions- when a farmer would have his farm foreclosed and put up for auction, his neighbors would wager only pennies to win and give the farm back to the original owner – Very successful- some states suspended foreclosures on farms

1. Young People Ride the Rail • Teenagers would leave their families and look for jobs or adventure by hopping illegally on to rail road cars • Some left because their family couldn’t afford them, others to get away from despair • They were called “hobos” and faced being arrested, injured, or even shot by angry farmers for taking food

2. Seeking Political Solutions • Radical ideas gained some popularity due to the harsh times • For example, the Socialist presidential candidate received almost 900, 000 votes in the 1932 election

3. Depression Humor • Used to get through their troubles • Hoovervilles- shanty towns for the homeless • Hoover blankets- newspapers used as blankets • Hoover flags- pockets turned inside out with nothing in them • Babe Ruth asked for a salary higher than President Hoover and joked, “I had a better year than he did. ”

A. Signs of Change • Prohibition is repealed - the 21 st Amendment – In 1933, ended the “failed social experiment” and cut down on gangsters who profited from selling alcohol illegally • The Empire State Building- offered a dramatic symbol of hope – Was the world’s tallest building (102 -story building)

1. The End of an Era • • Al Capone was arrested Babe Ruth retired Henry Ford lost his popularity Charles Lindbergh’s baby was kidnapped and murdered which symbolized his fall from a national hero and shook the nation

IV. The Election of 1932 • President Hoover tried to “engineer” a way to get the U. S. out of the Depression, but his strict adherence to his political beliefs greatly limited any accomplishments – He believed in Laissez-faire • Herbert Hoover (R) vs. Franklin D. Roosevelt (D)

A. Hoover’s Limited Strategy • Hoover believed confidence is all that the economy was lacking • He insisted that his administration and business leaders maintain public confidence and he believed the economic conditions would turn around soon

1. Voluntary Action Fails • Hoover believed voluntary controls by businesses in the U. S. were the best way to end the economic crisis • Held a meeting with the top business leaders – Promised to keep worker’s wages up voluntarily • Didn’t work as companies were forced to cut wages • Hoover and the Republicans were soon blamed for not taking any action

2. The Government Acts • Despite common beliefs, Hoover did try to act – His policies were just not strong enough or not the correct policy • Helped create some jobs by constructing the Boulder Dam (later named the Hoover Dam) • Hawley-Smoot Tariff - tried to protect domestic (American) industries with the largest import tax in U. S. history – A complete backfire… European nations also raised their tariffs and international trade diminished greatly

3. Hoover’s Unpopularity Grows • Hoover insisted state and local governments should handle relief • His refusal to provide direct aid brought a bitter public reaction and negative publicity – He was blamed, sometimes unfairly, for everyone’s problems • Side-note-- John Maynard Keynes (economist) argued that massive government spending could turn around the slumping economy

4. Veterans March on Washington • Low point for President Hoover (1932 summer) • 20, 000 jobless WWI veterans and their families encamped in Washington, D. C. – Called themselves the Bonus Army – Wanted payment of a pension that had been promised for 1945 • The Bonus Army faced their own country’s guns, tanks, and tear gas – This lasting image helps defeat Hoover in the election

B. A “New Deal” for America • “I pledge myself to a new deal for the American people, ” pledged Franklin Delano Roosevelt (FDR) • FDR- married to Eleanor (a very influential 1 st lady who happened to be the niece of Teddy) – Graduated from Harvard – Worked in a law firm, the NY Senate, and as Assistant Secretary of the Navy – Came down with polio in the 1920’s and could never walk again without help – Planned to change the role of the Federal Government

C. The Election of 1932 • The campaign was “more than a campaign between 2 men, it was a campaign between 2 philosophies of government” • This election would prove to change the American government forever • FDR won the presidency by a huge margin – People wanted out of the Great Depression and FDR provided hope and action