7.9 – The Great Depression

Black Tuesday

• October 29, 1929

• Stock market collapsed → billions of dollars lost

• Marked the beginning of the Great Depression

Excessive Use of Credit

• People bought goods using borrowed money

• Created massive debt

• When the economy slowed, people couldn’t repay → crisis worsened

Overproduction of Goods

• Factories and farms produced more than people could buy

• Prices dropped → businesses lost money

• Led to layoffs and economic decline

Buying on Margin

• Buying stocks with borrowed money

• Very risky → when stock prices fell, investors lost everything

• Made the crash much worse

Self-Reliance”

• Belief that people should solve their own problems without government help

• Associated with Herbert Hoover

• Led to limited government response early in the Depression

Hawley-Smoot Tariff

• Raised taxes on imported goods

• Hurt international trade

• Other countries retaliated → global economy worsened

Bank Failures

• Banks closed after people rushed to withdraw money (bank runs)

• Millions lost their savings

• Reduced money in circulation → deepened the Depression

Unemployment

• Businesses closed → millions lost jobs

• By early 1930s, about 25% of Americans were unemployed

Hoovervilles

• Shantytowns built by homeless people

• Named after Hoover (blamed for the crisis)

• Symbol of widespread poverty

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Reconstruction Finance Corporation

• Government program that gave loans to banks and businesses

• Meant to stabilize the economy

• Critics said it helped big businesses more than ordinary people

Bonus March

• WWI veterans demanded early bonus payments

• Government refused → protests in Washington, D.C.

• Army forced them out → hurt Hoover’s reputation