7.9 The Great Depression

business failures, unemployment, stock market crash, Black Tuesday, Dow Jones index, uneven distribution of income, buying on margin, excessive use of credit, overproduction, high tariffs, federal reserve, bank failures, gross national product, poverty and homelessness, Herbert Hoover, self reliance, Hawley-Smoot Tariff, debt moratorium, Farm Board, Reconstruction Finance Corporation, bonus march

the Great Depression

the Great Depression

longer lasting than any other previous panic or depression, more business failures and unemployment, more people were affected

causes of the 1929 crash

• stock market crash - stock prices were rising and suddenly collapsed

• Black Thursday - unprecedented amount of selling, stock prices plunged, temporarily stabilized by bankers buying millions of dollars of stocks

• Black Tuesday - millions of investors tried to sell, no buyers, Dow Jones index falls

underlying causes of the Great Depression

• uneven distribution of income

• stock market speculation/buying on margin

• excessive use of credit - increased borrowing and installment buying

• overproduction of products that workers with stagnant wages could not afford

• weak farm economy

• government policies - high tariffs, Federal reserve kept tight money policies, bank failures cased people to panic and withdraw money

• worldwide depression, U.S. insistence on loan repayment

effects of the Great Depression

• poverty and homelessness increased

• U.S. gross national product (value of all goods and service by the nation in one year) dropped significantly

• nation’s income declined by over 50%

• ~20% of all banks closed, 10 million savings accounts were wiped

• money supply contracted by 30%

• 25% (13 million people) of the workforce were unemployed

President Herbert Hoover’s policies

• self reliance - the belief in the natural return of prosperity through lack of legislative action, not cutting wages, not striking, and private charity efforts

• Hawley-Smoot Tariff - high tariffs, tax increases on foreign imports, international trade declines → further economic depression

• debt moratorium - suspension on payment of international debts, massive loan defaults, depositors withdraw money

• Federal Farm Board - too modest to help with overproduction, unable to stabilize farmers’ prices

• Reconstruction Finance Corporation - created to assist faltering financial institutions by stabilizing key businesses with emergency loans, trickle down

despair and protest

• farmers banded together to stop banks from foreclosing on farms and evicting people

• Farm Holiday Association - tried to stop prices dropping by stopping all grain crop from reaching the market

• bonus march (1932) - unemployed war veterans marched to D.C. and demanded their promised bonus payments, driven away by tanks and tear gas