The Great Depression

The Great Depression

1929
• America was at the height of prosperity.
• Higher wages, more free time, & new inventions led to consumer society.


All that changed in 1929.
The Great Depression not only affected the US, but Europe as well.

Causes
1. Stock Market Crash of 1929- October
2. Bank failures
3. People stopped buying things
4. Smoot-Hawley Tariff & the American Economic Policy
5. Drought (not a cause but a major event during the Depression era)

The Stock Market
Background
• With more money to spend people invested on the stock market.
• President Hoover’s aim: “a chicken in every pot and two cars in every garage”.
BUT
• 50% of American families earned less than $2000 a year
• American Industry was producing too many goods

Businesses & Stocks
• Companies borrow money to pay for equipment or staff
• To make more money, they can sell stocks, or shares in their company
• Investors get a share of the profit the company makes
• ‘Shareholders’ can sell their shares on the stock market.
• Prices can change every day according to how well the company is doing.
• Prices can also change no matter how the company is doing
• this is called Speculation
• American industry booms, price of stocks go up
• People see the stock market as a way to make easy money
• Banks use your money to buy shares in companies
• Investors sell their shares at higher prices and make huge profits
• More people invest, pushing prices higher
• People buy “on the margin” – you borrow $$ from a broker to buy stocks. When they pay off, both of you get $$

Timeline of the Crash
• Sat 19th Oct - 3.5 million shares sold. Prices fall
• Sun 20th Oct - “Stocks driven down as wave of selling engulfs market”
• Mon. 21st Oct - Over 6 million shares change hands. Prices fall then rise in the afternoon. There are still buyers on the market
• Tue 22nd Oct - Prices begin to rise
• Wed 23rd Oct
• 3 million shares sold in the last hour of trading
Black Thursday
• OCTOBER 24
• Morning: Stock prices begin to fall, & people get desperate – try to sell their stocks
• Brokers start to panic – refuse to buy on margin
• Almost 13 million stocks sold
• Noon: 2 exchanges had shut down, 11 had committed suicide
• A meeting of bankers was held @ J.P. Morgan
• Richard Whitney, v.p. of the Stock Exchange, went onto the floor & started buying high.
• Others followed suit, & the market recovered

….for now

Oct 25-28 – the market begins to recover
Trading remains pretty heavy, prices stay steady
Many investors were still nervous

Black Monday
• The market opens with a flood of selling
• There wasn’t the support of bankers like there had been on the 24th
• Over 9 million shares sold
• New York Stock Exchange value dropped 10 million in 1 day

Black Tuesday
• Market opens @ 10am & everyone begins selling their stocks
• Stock prices at an all-time low
• Bankers were no longer trying to help the market – they were selling stocks too
• By the end of the day, the volume of shares was very high
• 14 billion dollars lost
• The market continued to drop – in June 1930, until July 1932, when it bottom
Black Tuesday is the beginning of the Great Depression

Effect of the Stock Market Crash on the Country
• Thousands of small businesses go bust.
• Banks closed.
• People bought less
• Suicides
• Unemployment

Banking System Collapses
• Banks invested heavily in the market
• Collapse of market led to bank failures
• Many depositors panicked, leading to even more bank failures

Mass Unemployment
• After the crash, over 1 million people lost their jobs
• Loss of income = people think there’s a crisis
• They stop their consumption of goods & services
– This leads to business making less money, so they go out of business
– If they wanted to stay in business, they had to cut wages & lay-off employees
Statistics
• 1929 (pre-crash) 1.5 million unemployed
• 1930 – 4.25 million unemployed
• 1931 – 8 million unemployed
• 1932 – 12 million unemployed

• Unemployment leads to homelessness & makes the economy go down even more

Effects on Farming & Agriculture
• Problems for Farmers:
– They hadn’t made money in the 1920s
– The price of crops stayed low
– No money leads to: debt, hunger, & bankruptcy
• Factories:
– Used machinery, so needed fewer workers
– More cost effective
The Bonus Army
• Patman Bill was to move up bonus payments from 1945 to 1933
• 1932 – thousands of veterans march to Washington DC
• They want their bonus
– They were unemployed & desperate
• They became known as the “Bonus Army”
• Their numbers grew to 25,000 within 2 months
• Veterans camped near the Capitol to support the bill
• Bill failed in Congress
• Hoover’s removal of vets made Hoover appear heartless

HoovervillesBU
• Settlements of shacks inhabited by transients and unemployed
• Derisively named after President Hoover
• Many cities and towns had at least one
• One of the biggest was in Central Park, NY
• People set up shacks made of wooden crates, tar paper, & other scraps they could find
• Most were on the outskirts of cities

Nearly anything that was a sign of the Depression or its hardships was linked to the beleaguered Hoover. A “Hoover blanket” was an old newspaper that might be used to cover someone. A “Hoover flag” was a person’s turned-out empty pocket. A piece of cardboard used to cover the hole in a worn-out shoe sole was called “Hoover leather.” An automobile powered by horses because the owner couldn’t afford gasoline might be called a “Hoover wagon.”

Most notable, however, were “Hoovervilles.” Many cities and towns had at least one Hooverville, a settlement of shacks in which many transient and unemployed people lived. “Hoovervillas” might be made out of any sort of material: cardboard, wood scraps, piano boxes, or even stones.

Hoover’s Response
• President Hoover overwhelmed
• Believed that private charity was best suited to solve problems
• Most efforts failed
• Reconstruction Finance Corporation achieved some success
• People blamed President Hoover for his lack of action
• His policy of “non-intervention” wasn’t working

The Dust Bowl
Remember…
• During WWI, farmers were told to increase production
• Overproduction of crops =drop in prices
• Farmers borrowed money to buy supplies & machinery
• People lost their farms; the land was unplanted but plowed

In the Early 1930’s,
• Drought hit the southwestern United States
• Hardest hit: Oklahoma & parts of Kansas & Texas
• No rain=dry soil…it blew away with the wind
• This led to…
The Dust Bowl
• Towns & farms were covered with layetrs of dust
• Dust storms lasted for days

• April 14, 1935 – Black Sunday
– One of the worst dust storms…a black Blizzard

Looking for Jobs
• People who had lost their farms/jobs heard about new opportunities in California
• They traveled there on Highway 66, through Oklahoma, Texas, New Mexico, &Arizona on its way to California
Okies
• The nickname for people that headed to California from Oklahoma
• Hoped to get jobs as migrant workers in the fruit & vegetable fields
• People in California thought the addition of more people would make life harder for them.
• They saw Okies as being lazy, poor, & dirty
• However, they were willing to take low paying jobs
• They lived in Okievilles on the outskirts of towns
• Large number of people moving to California - fewer jobs available
• One job available for every 50 men

End of the Dust Bowl
• 1937 – end of the drought provides new life to farms
• The conditions lasted for 4 years, but it would take years for the land & people to recover.