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Causes of the Great Depression

• Stock Market Crash

  • Not a direct cause of the Great Depression; serves as a marker for its beginning.

  • On October 29, 1929, known as Black Tuesday, 16 million shares were sold with no buyers.

• Government Policies

  • Tariff Policies:

    • Tariffs during the 1920s stunted international trade by 66% by 1932.

    • The Smoot-Hawley Tariff, enacted in 1930, intended to aid American farmers by taxing foreign goods; resulted in retaliatory tariffs from other nations, escalating into a trade war.

  • Federal Reserve Decisions:

    • Restricted money supply to comply with the gold standard, preventing banks from lending to businesses and individuals, exacerbating the economic crisis.

• Stock Speculation

  • Buying on margin allowed investors to purchase stocks with minimal initial payment; this practice backfired as stock values fell in the late 1920s, leading to widespread financial loss and inability to repay loans.

• Consumerism

  • Increased expendable income led to higher consumer spending; however, as the economy contracted, individuals could not repay debts, resulting in foreclosures and loss of homes.

The Impact of Herbert Hoover

• Background

  • Elected in 1928, Hoover had a successful career prior to presidency, including significant contributions in food relief during World War I.

  • Despite his successes, he faced the worst economic crisis shortly after taking office.

• Policies under Hoover

  • Implemented the Smoot-Hawley Tariff to support farmers.

  • Established the Reconstruction Finance Corporation (RFC) to provide loans to businesses, banks, and insurance companies; however, he refused to provide direct aid to individuals to maintain the "pioneering spirit" of Americans.

• Public Response

  • As the Depression worsened, many lost their homes and created shantytowns termed "Hoovervilles".

  • Hoover became a scapegoat for the Depression, with disdainful symbols such as "Hoover flags" representing empty pockets and "Hoover blankets" referring to newspapers used for warmth.

The Bonus Army Incident

• Veterans protested in 1932 for promised bonuses, creating significant unrest.

• General Douglas MacArthur was ordered to clear the protesters, resulting in violence and deaths, severely damaging Hoover's reputation.

Election of 1932

• Franklin D. Roosevelt's Rise

  • Roosevelt won the 1932 election decisively, representing a shift in political power from Republicans to Democrats.

  • The New Deal Coalition formed, shifting African American support to the Democratic Party.

• Roosevelt’s First Actions

  • Promised relief and recovery through government action, famously stating, "We have nothing to fear but fear itself" in his inaugural address.

  • Introduced bold experiments in federal programs to combat the Great Depression.

Key Legislation and the New Deal

• The First Hundred Days

  • Roosevelt's administration passed 15 major pieces of legislation aimed at relief, recovery, and reform.

  • Federal Emergency Banking Act: Closed banks for evaluation and supported stable banks to reopen.

  • Glass-Steagall Act: Established the FDIC to insure bank deposits, providing a safety net for depositors.

Conclusion

• The New Deal fundamentally changed the government's role in the economy, with an emphasis on direct aid and/or reform initiatives to revitalize the nation following the Great Depression.