The document summarizes the key events and factors that led to the Great Depression: 1) Many industries and the agricultural sector were struggling in the 1920s due to overproduction and new competition. 2) The stock market crash of 1929 signaled the beginning of the Great Depression as banks collapsed and businesses failed. 3) Millions lost their jobs and homes, leading to immense hardship, suffering, and the formation of shantytowns across the country. President Hoover initially believed the economy would recover on its own, but his limited interventions were unsuccessful in alleviating the crisis.

1. The Great Depression
The BIG Picture: The boom times of the 1920's had never
reached into all sectors of the economy. Much of the
prosperity rested on shaky foundations. In 1929 the
economy's underlying weaknesses were exposed. The stock
market collapsed, and the nation plunged into the worst
economic depression in its history.

2. economy
• the management of the resources of a
community, country, etc., especially with a
view to its productivity.
• A system for people to get the things they
need

3. 1. The Nation's Sick Economy
A) Industries in Trouble
•A number of key basic industries, such as textiles, steel,
and railroads, barely made a profit. RR's lost business to
new forms of transportation (trucks, buses, automobiles).
•Mining and lumbering, which expanded during WWI,
now faced a large decline in the demand for these goods.
Coal mining was especially hit hard because of the
competition from new forms of energy, including
hydroelectric power and natural gas.

4. • The construction of new houses fell by 25% between
1925 and 1929. Housing starts or the number of new
dwellings beginning construction are an important
economic indicator, because house construction has
spinoff effects on other industries such as building
materials, new furnishings, new equipment, new
appliances, and provides jobs in construction.
So what’s an economic
indicator?
Statistical data showing
general trends in the
economy. Ex: Housing starts,
unemployment, stock market
prices, & industrial
production.

5. B) Farmers Need a Lift
•Agriculture suffered the most in the 1920's. During
WWI, the demand for crops such as wheat and corn
soared, causing the prices to rise. Farmers took out loans
to buy more land and new equipment. After the war, the
demand for farm goods fell and crop prices declined by
50% or more.
•Many farmers went into debt trying to pay off loans and
many lost their farms when the bank foreclosed and
seized the property as payment for the debt. As farmers
began to default on their loans, many rural banks began
to fail.

6. List all sectors of the economy
facing trouble during the 1920’s.

7. C) Consumers Have Less Money to Spend
• Americans were buying less mainly because of
1. rising prices,
2. stagnant wages,
3. unbalanced distribution of income, and
4. over buying on credit in the previous years.

8. Superficial Prosperity
• Many Americans appeared
prosperous during the 1920's,
but they were living beyond their
means. They often bought on
credit or used installment
buying causing Americans to
pile up a large consumer debt.
Many people had trouble paying
off their debts so they cut back
on spending.

9. D) The Stock Market Comes Tumbling Down
• Most Americans were unaware of the economic disaster
that was around the corner and continued to have
confidence in the economy. (False sense of security)
Many invested in the stock market and during the 20's
stock prices rose steadily. This is known as a bull
market - a period of rising stock prices.

10. • As prices continued to rise,
many investors were
engaging in speculation
- they bought stocks and
bonds on the chance that
they might make a quick or
large profit, ignoring the
risks. As a result, the price
of stocks had little
relationship to the
dividends the stocks paid.

11. • Investors were also buying
on margin - paying a
small percentage of the
stock's price as a down
payment and borrowing the
rest. Stockbrokers were
willing to lend up to 75% of
a stock's purchase price, so
buying on margin became
rule. This worked as long as
prices continued to rise. If
stocks declined, there was
no way to pay off the loan.

12. • The Federal Reserve
System, which serves as
the nation's bank,
attempted to make it
more difficult for
stockbrokers to borrow
cash to allow investors to
buy on margin.

13. • In early September 1929,
stock prices peaked and
began to decline. Many
investors sold their stock
and pulled out of the
market. On October 24th
1929, the market took a
plunge and panicked
investors unloaded their
shares.

14. • October 29th 1929 known
as Black Tuesday - the
bottom fell out of the
market. People and
corporations tried to sell off
stocks before the prices
plunged even lower.
Individuals who bought
stocks on credit acquired
large debts as the prices
fell. Others who put most of
their savings into the stock
market lost a large portion
of their nest eggs.

15. • 16 million shares were
dumped that day. By mid-
November, investors had
lost $30 billion - the
equivalent to American
spending in WWI. The
stock market bubble
finally burst.

16. E) Causes of The Great Depression
•The stock market crash signaled the beginning of the
Great Depression - the period from 1929 to 1941 in which
the economy was in a severe decline and millions of
people were out of work.
A common set of factors contributed to
the Great Depression
1. An old and decaying industrial base
2. A crisis in the farm sector (Over Production)
3. The availability of easy credit
4. An unequal distribution of income

17. F) The Effects of the
Crash
•The impact on
individuals: Many lost
years of gains and watched
their fortunes disappear.
Margin buyers were left
with large debts to pay and
had to sell off stocks for
much lower than its
purchase price.

18. • Effects on banks: Many
rushed to the banks to
withdraw their money,
draining the banks of
funds. Many banks had
invested in the market too.
Banks also made loans to
the stockbrokers who
loaned the money to
investors to buy on margin.
Loan failures eventually
drove many banks out of
business.

19. • Effects on business:
Banks and investors
were unwilling or unable
to provide industries with
the money it needed to
grow and expand.
Consumers were
spending less and many
companies began to lay
off workers.

20. • Effects overseas: Europe suffered through much of the
20's with high debts from WWI. Congress made a bad
situation worse by passing the Smoot-Hawley Tariff
Act which established the highest protective tariff in
U.S. history. It was designed to protect American
farmers and manufactures from foreign competition.
Other countries responded with their own tariffs
resulting in a worldwide decline in trade and economic
activity.

21. What was the goal of the
Smoot-Hawley Tariff Act?

22. What was the result of the
Smoot-Hawley Tariff Act?

23. 2. Hardship and Suffering During the
Depression
A) The Depression in the Cities
•Many people who lost their jobs could no longer afford to
pay their rent or mortgages and ended up living on the
streets. Large shantytowns - little towns consisting of
shacks - sprang up on the outskirts of cities which came to
be known as Hoovervilles.

25. Louisville flood victims line up for relief, ironically, in front of a billboard extolling
the American way in 1937.

27. • The urban poor could be
seen scrounging for food,
digging in garbage cans or
begging on street corners.
Soup kitchens - places
where food is offered free to
the needy - and bread lines
- lines of people waiting to
receive food provided by
charitable organizations or
public agencies - became a
common sight in the cities.

28. B) The Depression in Rural Areas
•Life in the rural areas was hard, but it did have one
advantage over city life: most farmers could manage to
grow some food to feed their families.
•The prices of crops continued to fall and many farmers
lost their land when they couldn't pay their debts
(foreclosure).

29. C) The Dust Bowl
•The drought that began in
the early 1930's wreaked
havoc on the Great Plains.
Farmers had used tractors in
the previous decade to break
up the grasslands and plant
millions of acres of new
farmland. The land was
exhausted through
overproduction of crops and
the land became unsuitable
for farming.

30. • Little grass and trees were
left to hold the soil down
as the drought and winds
picked up causing major
dust storms that covered
just about everything in its
path.

31. What issues caused the environmental
crisis known as the dust bowl?

32. • Thousands of farmers
were forced to leave their
land behind and headed
out West to California.
These migrants were
called Okies - originally
referred to Oklahomans,
but came to be used
negatively for all the
migrants. Some found
work as farm hands, but
others continued to
wander in search of work.

33. Effects on the family
•Making ends meet was a daily struggle and in some
cases, families broke apart under the strain.
•Many men had difficulty coping with unemployment
because they were accustomed to working and supporting
their families. Approximately 2 million men wandered the
country in search of jobs, hitching rides on railroads or
boxcars and sleeping under bridges (hobos).

34. • Children also suffered great hardship. Poor diets and
lack of money for health care led to serious health
problems.
• Falling tax revenues also caused many schools to close
or reduce the school year. This sometimes forced
children to work in sweatshops under horrible
conditions.

35. Psychological Impact
•Some people were so demoralized that they lost their
will to survive. Between 1928 and 1932, the suicide rate
rose by nearly 30%.
•The stigma of poverty and having to scrimp and save
never disappeared completely. Achieving financial security
became the primary focus in life.

36. 3. Hoover Struggles with the Depression
A) Hoover Tries to Reassure the Nation
•Many economists believed that the economy would fix
itself. Hoover believed that the economy should be
allowed to function with minimal intervention, but he felt
that the government could play a role in helping resolve
the economic problems.

37. • Hoover strongly believed in
"rugged individualism"
- the idea that people should
succeed through their own
efforts - and take care of
their families, rather than
depend on the government
to bail them out. He opposed
any form of federal welfare
and thought that it would
weaken people's self-
respect and undermine the
nation's moral fiber.

38. •In the 1930
Congressional elections
the Democrats took
advantage of the anti-
Hoover sentiments and
won more seats in
Congress. Criticism of
the President and his
policies continued to
grow.

39. B) Hoover Takes Action
•Hoover started to direct
federal funds into projects
such as building the Hoover
Dam, which was designed to
jump-start the economy and
add jobs.

40. • Congress allowed $800 million for the public works
program to build large projects in an effort to
stimulate business and provide jobs for unemployed
workers.
• Many of Hoover's measures failed to turn the
economy around and with an election around the
corner he appealed to Congress to pass a series of
banking reforms. The Federal Home Loan Bank
Act was passed which reduced mortgage rates for
homeowners and allowed farmers to refinance their
farm loans and avoid foreclosure.

41. • The President's most
ambitious economic measure
was the Reconstruction
Finance Corporation
(RFC) which authorized
emergency financing to banks,
life insurance companies,
railroads and other large
businesses. This was intended
to pump new life into the
economy by fueling business
expansion. He believed the
money would trickle down to
the average American through
job growth and higher wages.

42. • Many critics argued that
only large corporations
would benefit and hungry
Americans could not wait
for the benefits to trickle
down to their tables.
• The RFC was an
unprecedented example of
federal involvement in a
peacetime economy, but in
the end, it was a little too
late.

43. Give three different actions taken
by the Hoover Administration,
aimed at jump starting the
economy.
Public works program, ie. Hoover DamPublic works program, ie. Hoover Dam
Federal Home Loan Bank ActFederal Home Loan Bank Act
Reconstruction Finance CorporationReconstruction Finance Corporation

44. C) The Bonus Army
•Gassing the Bonus Army
(1932) was yet another
incident that further
damaged Hoover’s
reputation.
•Approximately 15
thousand WWI veterans
and their families arrived in
Washington, D.C. to
support the Patman Bill.

45. • The Patman Bill
authorized the government
to pay a bonus to the WWI
veterans who had not been
adequately compensated
for their wartime service.
This bonus, which
Congress approved in
1924, was supposed to be
paid out in 1945, but
Congressmen Patman
believed that it should be
paid out immediately.

46. • Hoover opposed the legislation,
but he respected the veteran's
right to peacefully assemble.
However, when the Senate voted
down the legislation, Hoover
ordered the Bonus Army to leave.
• Nervous that the angry group
could become violent, Hoover
ordered the Bonus Army to be
disbanded and sent troops with
guns, bayonets, and gas to put an
end to the assembly. More than
1,000 people were gassed
including an 11 month old who
died.

47. • Most Americans were
stunned and outraged at
the government's
treatment of the veterans.
• The downturn in the
economy and Hoover's
inability to effectively deal
with the Depression had
sealed his political fate as
the next Presidential
election was nearing.