Unit 8C: The Great Depression

Notes

• the 1920’s were a decade of consumer spending and the economy looked healthy on the surface

• Income did increase in the 1920’s, but there were severe problems with the U.S. Economy

• In October 1929, the “Roaring Twenties” came to an end and the Great Depression began

• Over Production and Under Consumption

  • By the end of the 1920’s, factories produced too many durable goods (known as over-production)

• Farmers and industry

  • Farmers could not pay back loans and many had their farms foreclosed

• Increasing American Debts

  • Many Americans used credit to live beyond their means, generate larg debts, and had to cut back on spending by the end of the decade

• Uneven distribution of wealth

  • The decade was not as wealthy as it appeared; despite rising wages, the gap between the rich and poor grew wider in the 1920’s

• Stock market speculation

  • The stock market soared throughout the 1920’s and people speculated by borrowing money to pay for stocks (buying on margin)

• On October 29, 1929 (Black Tuesday) the stock market crashed

• Speculators who bought stocks could not pay it back

• Hundreds of banks failed and thousands of people lost their savings

• The banking failure and stock market crash led to the collapse of thousands of businesses

• When the Great Depression began, millions of people lost their jobs or took pay cuts to keep their jobs

• Americans lacked confidence in the future so they tried not to spend money

• The Great Depression led to a global depression in Europe, Asia, and Latin America

• To encourage citizens to buy from U.S. companies (not foreign competitors) the government passed new high tariffs (Hawley-Smoot)

• The Great Depression led to a collapse of the American financial system by 1933

• The lack of banking meant there was no money for investment

• Unemployment peaked at 25% of all Americans

• The USA had record poverty and suicide rates and healthcare declined; Charities offered soup kitchens and breadlines to help

• The effects of the depression were made worse by the Dust Bowl

• President Hoover Believed that America could overcome the depression through “rugged individualism” (using hard work and perseverance

• Hoover private charities to help (“volunteerism”)

• As the depression worsened, Hoover called for more direct government action to ease peoples’ suffering

• Congress created the Reconstruction Finance Corps (RFC) to loan money to save failing businesses

• By the election of 1932, Americans were looking for new leadership and a president who could save them from the great depression (FDR)