The Great Depression n The Long Bull Market – this was a long period of rising stock prices known as the bull market. The stock market was established as a system for buying and selling shares of companies. Prosperity of the 1920 s caused Americans to invest heavily in the stock market.
The Stock Market n n n The bull market continued to grow and people bought stocks on margin, making a small cash down payment. This was considered safe as long as the market continued to rise. Once the stock began to fall, the broker could issue a margin call demanding that the investor repay the loan immediately. In the 1920 s, new investors bid prices up without looking at a company’s earnings and profits. Speculation occurred when investors bet on the market climbing and sold whatever stock they had in an effort to make a quick profit.
The Great Crash n n By 1929, a lack of new investors in the market caused prices to drop and the bull market to end. As brokers placed their margin calls, customers responded by placing their stocks up for sale, causing the stock market to plummet further. Stock prices fell drastically on October 29, 1929, Black Tuesday, resulting in a $10 to $15 billion loss in value. This did not cause the Great Depression alone, however, it did weaken the banks.
The Roots of the Great Depression n n n Overproduction of goods – this was due to the efficient machinery Americans could not afford to buy all of the manufactured goods The uneven distribution of wealth added to the problem. In 1929 the top 5 percent of American households earned 30 percent of the country’s income. More than two-thirds of the nation’s families earned less than $2, 500 a year. Low consumption of goods. As sales decreased workers were laid off. Many Americans bought goods on the installment plan (credit). The Hawley-Smoot Tariff intensified the Depression by raising the tax on imports. Americans purchased less from abroad because of high cost. In turn, foreign companies raised their tariffs on American goods. The Federal Reserve made the mistake of lowering interest rates.
The Depression Worsens n n n Thousands of banks had closed and millions of Americans didn’t have jobs Unemployed workers often stood in bread lines to receive food or at soup kitchens where private charities gave to the poor Many lost their homes because they couldn’t pay their mortgage • Hoovervilles – were shacks in shantytowns • They were called this because the public blamed President Herbert Hoover • Farmers suffered due to the “Dust Bowl, ” which was a drought in the Midwest
Escaping the Depression n Americans escaped the hardships of the Depression by going to the movies and listening to radio broadcasts. Walt Disney produced the first full length animated film, Snow White and the Seven Dwarfs, in 1937. The Wizard Of Oz and Gone With the Wind, contributed to the relief.
Promoting Recovery n n n President Hoover held a series of conferences bringing together the heads of banks, railroads, big business, labor, and government. Hoover also increased public works – government financed building projects. Americans blamed the Republican Party for the Depression.
Pumping Money into the Economy n n n President Hoover tried to persuade the Federal Reserve Board to put more currency into circulation, but the board refused. Hoover set up the National Credit Corporation (NCC), which created a pool of money to rescue banks, but it was not enough to help. Hoover asked Congress to set up the Reconstruction Finance Corporation (RFC) to make loans to banks, railroads, and agricultural institutions.
Angry America n n n The unhappiness in America resulted in large displays of violence Looting, rallies, and hunger marches began Foreclosures between 1930 and 1934 took almost 1 million farms. In 1924 Congress enacted a $1, 000 bonus to be paid to veterans in 1945. In 1931 a bill was introduced in the House that authorized early payment of the bonus. In 1932 the “Bonus Army” marched to Washington D. C. , to ask Congress to approve legislation.
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