US History
Chapter 15
Crash and Depression
Section 1
The Stock Market Crash
What events led to the stock market crash?
Stock prices soared past their actual value.
Real value is based on company assets and earnings
Dow Jones Industrial Average - an average of stock prices of major industries
In a year and a half the Dow Jones doubled from 191 to 381
Black Tuesday, Oct. 29, 1929
Date of the Great Crash
Record 16.4 million shares of stock sold
By November 13, the Dow Jones had dropped to 198.7
How did the Great Crash ripple through the economy?
Risky loans hurt banks - high-risk businesses could not repay loans; businesses closed
Consumer borrowing - loans were not being repaid
Bank runs - depositors demanded their savings; banks did not have money on hand
Bank failures - banks had no money; unpaid loans and bank runs
5,500 banks failed in two years
Savings wiped out - Banks had no money
By 1933, 9 million savings accounts vanished
Cuts in production - no money to borrow; consumers were not buying
Rise in unemployment - cuts in production led to layoffs
Further cuts in production - cycle of no consumer spending, cuts in production; more layoffs
Farmers, who were already suffering, lost more
GNP fell from $106 billion in 1929 to $56 billion in 1933
Business cycle - a span in which the economy grows then contracts
Business cycles are an expected part of economies
Expansions - increasing employment, income, and general prosperity
Peak - the top of expansion
Contraction - dwindling business activity; unemployment; economic downturn; recession
Particularly long and severe contraction is a depression
Trough - the bottom of contraction
The Great Crash triggered the Great Depression
Great Depression - the most severe economic downturn in the nation’s history
October 1929 until the start of World War II
The Great Depression rippled around the world
US, The leading economy had
Bought goods from South America; stopped buying
South American economies faltered
Invested in German companies; investments stopped
German economy faltered
Germany could not repay reparation to England and France
Required Allies to repay war debt; they could not
Allies relied on German reparation for income
Allies economies faltered
What were the underlying causes of the Great Depression? Review from Chapter 14
Unstable economy
Wealth in the hands of a few
Overproduction
Overspeculation
Stocks bought with borrowed money
Used value of stock as collateral to buy more stock
Government policies
In the 20s Federal Reserve cut interest rates to spur economic growth
In 1929 Federal Reserve tightened the money supply
Section 2
Social Effects of the Depression
What were the social effects of the Great Depression?
People from all socioeconomic lines found themselves without jobs and homes
Hooversvilles began to pop up
Hooversvilles were shantytowns built out of scrap; named to mock the President
Homeless and unemployed began roaming the country
By 1933 an estimated one million were on the road
Farmers continued to suffer often having their family farms foreclosed; approx. 60%
In protest, farmers dumped milk and destroyed crops
Farmers also faced an environmental disaster
Dust Bowl - farmers had plowed under the natural protection of prairie grass
exposing the soil to erosion by the wind
Tons of soil was blown away
The Depression caused serious physical and psychological distress
Impoverished people could not afford food or medical help
People who could not afford food or shelter got sick more easily
Children suffered most from the long term effects of poor diet and inadequate
medical care
Suicides occurred due to anxiety and depression
Men who lost jobs felt inadequate because they could not take care of their families
If women worked, they were accused of taking jobs from men
Many women were fired
Jobs women did keep were considered “women’s” work:
Domestic service, typing, and nursing
Discrimination increased for Blacks, Hispanics, and Asians
White laborers began demanding their jobs
Asians, even American born, were deported
By 1932, unemployment for blacks stood at 56%
Section 3
Surviving the Great Depression
What did Americans do day-to-day to survive the Great Depression?
Hobos created a symbol system to communicate how welcoming or dangerous an area was
Farmers banded together to save neighboring farms
Penny Auctions - farmers would bid pennies for land and equipment
Returning the land and equipment to the owner
Some states passed laws suspending foreclosure on farms
Few Americans called for violence
Communist and Socialist Parties offered solutions to economic problems
Humor was used
Signs of change
21st Amendment - repeal of the 18th Amendment (Prohibition)
Prohibition lasted 15 years
Empire State Building was erected, opened 5-1-31
Al Capone convicted of tax evasion
Section 4
The Election of 1932
How do Hoover’s and Roosevelt’s ideas on government compare?
Hoover’s ideas on government - (Republican)
Originally blamed the Great Depression on “world-wide economic conditions”
Insisted conditions would improve soon
Called for voluntary controls by businesses to maintain wages and remain open
Hawley-Smoot tariff
Highest import tax in history
Attempt to protect domestic industries
Suspended Allies war debt payments
Reconstruction Finance Corporation
Gave government credit to large industries, railroads, insurance companies
Lent money to banks to extend loans
Home Loan Bank Act discounted mortgage loan rates
Bonus Army
Jobless WWI veterans and their families set up a camp city in DC
Demanded early payment of pension bonus
Those who did not leave when ordered were forced out by the Army
Campaign song - “Brother can you spare me a dime”
Roosevelt’s ideas on government - (Democrat)
As NY governor set up first agencies to aid poor
Unemployment commission and relief administration
Government must step in and help
Campaign song - “Happy Days are Here Again”