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■Essential Question: –What caused the Great Depression & how did the federal government respond? The Great Depression The Great Depression ■The Depression of the 1930s came as a shock to Americans: –The consumer revolution led to confidence that 1920s economic prosperity would continue –When the stock market crashed in 1929, businesses closed & millions were unemployed –Americans began to look to the gov’t for unprecedented support The Great Crash ■Prelude to the stock market crash –In 1927, the economy had a recession but gov’t & business leaders ignored warning signs –The Federal Reserve lowering interest rates for loans would stimulate the economy, but this easy credit led speculators to buy stock on-the-margin The Great Crash ■An initial stock market crash on Oct 24, 1929 (Black Thursday) led to a catastrophic drop in stocks on Oct 29 (Black Tuesday) –Panicked investors sold stocks, causing stock prices to plummet –Banks lent less money, factories produced less, workers were fired or paid less → consumers had less money to spend → factories & businesses closed Unemployment, 1929-1942 This downward spiral continued for 4 years; By 1932 unemployment was at 25% The Great Crash ■Reasons for the depression: –U.S. factories overproduced consumer durable goods –The post-war conditions in Europe decreased foreign trade Consumers already owned durable goods & distribution were not buying –Unequal of more wealth, high consumer debt, stock market over speculation led to an overall decrease in consumer purchase power In 1929, the total market debt of By U.S. the1934, USA was 210% of the debt rose to value of 265% of GDP GDP In 2005, the value of U.S. debt was 303% of GDP Effects of the Great Depression ■The Depression hit all classes: –Many families lost their homes or farms & were forced to live in “Hoovervilles” –The U.S. saw unprecedented poverty & suicide rates; fathers abandoned their families; lawlessness ensued –The U.S. gov’t offered relief checks to the unemployed Effects of the Great Depression ■African-Americans who had migrated to North were laid off ■Mexican immigrants faced competition & deportation from angry Americans ■The middle class was hit hard: –Refused relief checks & charity –Many lost their homes –Health care declined; doctor & dentist visits were “luxuries” Employment Agencies & Relief-Check Lines Soup Kitchens & Breadlines Mortgage Foreclosures These 4 potatoes are Christmas Dinner Where’s daddy? “Hoovervilles” & “Hoover Flags” Hoover Struggles to Fight the Depression Hoover and Voluntarism ■Hoover’s initial response was to “Rugged individualism” reassure Americans that prosperity would return ■Hoover rejected bold gov’t action & called for volunteerism among charities, local gov’t, & business ■As the depression worsened, Hoover called for gov’t projects like the Reconstruction Finance Corps (RFC) which loaned money to failing businesses The Hoover administration initiated job-creation programs, like building the Hoover Dam Hoover and Voluntarism ■In 1932, President Hoover suffered two final blows: –When 22,000 war veterans marched to the capital to demand their WW1 bonus checks early, Hoover ordered this Bonus Army to be forcibly removed –The steady rise of bank failures led to a complete collapse of the U.S. banking system Bonus Army Douglas MacArthur Dwight Eisenhower Bank Failures, 1929-1933 Fighting the Depression ■The inability of Republicans to resolve the economic depression opened the door for a Democratic takeover in politics ■Once in power, Democrats succeeded in relieving some suffering, restored hope, & created an unprecedented level of gov’t intervention in the process