Download The Wall Street Crash of 1929 and the Great Depression 1

The Wall Street Crash and the Great Depression
The Wall Street Crash of 1929
and the Great Depression
1. The Roaring Twenties and the Wall Street Crash
The period that followed the end of the First World War was a
prosperous one for most Americans and many called it the “Roaring
Twenties”. When Herbert Hoover became President in March 1929,
the economy was still booming. Hoover promised a continuation of
the boom and “a chicken in every pot” for each American family. As
the economy grew, stocks prices soared. By the end of the decade,
as many as 25 million Americans had placed money in the stock
market. People did not need a lot of cash to invest in the stock
exchange. Many bought stocks on margin. This meant they
borrowed the money to buy stocks using the value of the stock
itself as collateral. By 1929, the total amount of debt amassed by this
practice had reached six billion dollars.
However, there were serious problems with the American economy. Prosperity depended on
people continuing to spend but many had large debts or had already bought the consumer goods
they needed. Wealth was distributed unequally as rising profits were not passed on to workers so
most people were too poor to share more. This meant demand did not rise as fast as production.
This led to overproduction, which meant industry was producing more than people wanted to
buy. Barriers to trade in place between the USA and Europe combined with economic problems
meant that Europe was not in a position to provide a good market for America’s surplus goods
either. By 1929, unsold stock was building up so manufacturers reduced production. As they
began to lay off staff, unemployment increased.
In September, some investors began to worry about prices and warned that a crash would happen
at some time. Some people started selling their shares, but during September the stock market
recovered: the banks helped to restore stability by buying up vast numbers of stocks. Then came
Black Thursday - October 24 1929 - when a drop in stock prices triggered a burst of panicselling so frantic that it overwhelmed the Stock Exchange’s ability to keep track of the
transactions. Wall Street financers were able to reverse the downward plunge only by buying as
many shares of stock as they could over the next two days. It was a temporary victory. Monday’s
opening bell unleashed a frenzy of selling that soon turned into an uncontrolled panic which
continued for the rest of the trading day. The following day - Black Tuesday, October 29 1929 saw the previous day’s panic turn into chaos on the trading floor.
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The Wall Street Crash and the Great Depression
The effects of the Wall Street crash were dramatic. Investors lost heavily, in many cases they were
unable to repay the brokers who had provided them with expensive loans to buy shares. Smaller
investors had often borrowed money using their homes as security, so the banks repossessed their
homes and evicted them. Some investors even committed suicide, the situation was so desperate.
Many companies went bankrupt in the period from 1929 to 1933 and some banks went out of
business as they could not repay their investors. Unemployment rose to 12 million by 1932. As
more people lost their jobs, sales fell and therefore more people became unemployed. A vicious
circle began and this led to the period in America that became known as the Great Depression.
KEY CONCEPTS
Buying on margin - The purchase of an asset by paying the margin and borrowing the balance from a
bank or broker. Buying on margin refers to the initial or down payment made to the broker for the
asset being purchased.
Black Thursday, October 24 1929 - It signalled the start of the Wall Street Crash in 1929. Black
Thursday was the first large fall in share prices. It was compounded by huge falls, a couple of days
later, on Monday 28 and Tuesday 29. On Black Thursday 2.894 million shares of stock were sold in
one day, most at prices far below their values of only a few days earlier. On Black Tuesday
approximately 16,410,000 shares, a record number, were sold. America’s economy steadily moved
into the Great Depression, the worst economic crisis in U.S. history.
MEANING OF …
BOOM (VERB): to increase and be very successful (prosperare, essere in grande crescita).
STOCK: a share in a company or the proprietorship element in a corporation usually divided into
shares (titolo, azione).
SOAR: to increase quickly to a high level (alzarsi, salire alle stelle).
STOCK MARKET-STOCK EXCHANGE: the place where stocks and shares are bought and sold or
the business of buying and selling stocks and shares (borsa).
COLLATERAL: property or other goods that you promise to give someone if you cannot pay the
money they lend you (garanzia).
WEALTH: a large amount of money, property etc that a person or country owns (ricchezza).
SHARE MORE (VERB): to be unable to buy many goods due to lack of money (condividere di più,
aggiungere altro, mettercene ancora).
SHARE (NOUN): one of the equal part into which the ownership of a company is divided (azione).
RECOVER: to return to a normal condition after a period of trouble or difficulty (riprendersi,
recuperare).
DROP: a reduction in the amount, level or number of something, especially a large or sudden one
(caduta).
TRIGGER: to make something happen very quickly, especially a series of events (scatenare, innescare,
dare il via).
BURST: a sudden outbreak of something, for example feelings or emotions (scoppio, esplosione).
FRANTIC: extremely hurried and using a lot of energy, but not very organized (frenetico, agitato,
convulso).
OVERWHELM: a work or a problem that become too much or too difficult to deal with (annientare,
distruggere, sopraffare).
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The Wall Street Crash and the Great Depression
DOWNWARD PLUNGE: a sudden large decrease in the price, value etc of something (drammatica
caduta libera).
UNLEASH: to suddenly let a strong force , feeling etc have its full effect (scatenare, provocare).
FRENZY: a state of great anxiety or excitement in which you cannot control your behaviour (foga,
frenesia).
TRADING FLOOR: the place where stocks and shares are bought and sold (borsa, piazza affari).
PROVIDE (SOMEONE WITH): to give something to someone or make it available to them,
because they need it or want it (fornire, concedere, dare).
LOAN: an amount of money that you borrow from a bank etc (prestito).
EVICT: to tell someone legally that they must leave the house they are living in (sfrattare).
SALES: the total number of produts that are sold during a particular period of time (vendite).
PHRASAL V ERBS
PASS ON: to give or to distribute something to someone (distribuire, estendere).
BUILD UP: to increase gradually, to become bigger or greater (crescere, estendersi, svilupparsi).
LAY OFF: to stop employing someone because there is no work for them to do (licenziare).
BUY UP: to quickly buy as much of something as possible (comprerare in blocco).
GO OUT OF BUSINESS: stop doing business because of financial problems (fallire, andare in
bancarotta).
2. The Great Depression
For people in the United States, the 1930s was the age of the Great Depression. In 1932, many
businesses failed as a result of the Wall Street Crash and many banks also collapsed. The price of
goods continued to fall and industrial production was cut. Wages fell and workers were made
unemployed.
President Hoover began to take some action. In 1930, he cut taxes and in 1931, he gave money to
the state to help build infrastructures such as the Hoover Dam, in order to provide work. In 1932,
he agreed to an Emergency Relief and Reconstruction Act which offered money to states that
wished to help the unemployed. In May 1932, veteran soldiers tried to persuade Hoover to pay
their war pensions early. Many of the war veterans had been out of work since the beginning of
the Great Depression. The World War Adjusted Compensation Act of 1924 had awarded them
bonuses in the form of certificates they could not redeem until 1945. Each service certificate,
issued to a qualified veteran soldier, bore a face value equal to the soldier’s promised payment
plus compound interest. Between 15-20,000 veterans called the “Bonus Army” marched to
Washington and built a Hooverville, a shanty town of homes made from cardboard, outside the
White House. The principal demand of the Bonus Army was the immediate cash payment of their
certificates.
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The Wall Street Crash and the Great Depression
On July 28, 1932, Hoover ordered the army to drive out the demonstrators and break up the
encampment. A riot followed and two veterans were shot and died.
By 1933 about 25 percent of the American workforce was unemployed. Farm product prices fell
dramatically and it was costing farmers more to harvest and transport their produce than they
could make by selling it. Between 1931 and 1938, four
separate droughts also hit the area of the Great Plains. This
combined with poor agricultural practices - no crop
rotation, fallow fields and overploughing - left few areas
with natural buffalo grass. In 1932, dust storms began and
windstorms stripped the topsoil from millions of acres
which turned the whole area into a vast dust bowl and
destroyed crops and livestock in unprecedented amounts.
As a result, by 1940, approximately 2.5 million people had
left the plains. About 200,000 went to California and the
others went to nearby cities such as Texas or Dallas and
Unemployed workers looking for a job
other areas on the Western Coast. Migrant farm labourers
and many others were unable to keep up mortgage
payments and so were evicted from their farms. Without unemployment benefit, many people
relied on soup kitchens and charity handouts. They lived in Hoovervilles. Although conditions
began to improve by the mid-1930s, total recovery was not accomplished until the end of the
decade.
KEY CONCEPTS
Emergency Relief and Reconstruction Act (1932) - The United States’s first major-relief
legislation, enabled under Herbert Hoover and later adopted and expanded by Franklin D. Roosevelt
as part of his New Deal. It was an amendment to the Reconstruction Finance Corporation Act (1932).
It created the Reconstruction Finance Corporation which released funds for public works projects
across the country.
World War Adjusted Compensation Act (1924) - A United States federal law that granted a benefit
to veterans of American military service in World War I.
Compound interest - Interest that is calculated on both the sum of money lent or borrowed and the
the unpaid interest already earned or charged.
Dust bowl - An area of land that has been turned into desert through lack of rain or too much
farming.
MEANING OF …
TAKE ACTION: the process of doing something, especially in order to achieve a particular thing
(fare qualcosa, agire).
DAM: a special wall built across a river or stream to stop the water from flowing, especially in order
to make a lake or produce electricity (diga).
PROVIDE: to give something to someone or make it available to them, because they need it or want
it (fornire, procurare).
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The Wall Street Crash and the Great Depression
AGREE (TO): to say yes to an idea, plan, suggestion (acconsentire).
AWARD: to officially give someone something such as a prize or money to reward them for
something they have done (assegnare, riconoscere).
REDEEM: to exchange a piece of paper representing an amount of money for that amount of money
or for goods equal in cost to that amount of money (riscattare).
ISSUE: to give things such as documents or equipment to people who need them (assegnare,
distribuire).
SHANTY TOWN: a very poor area in or near a town where people live in small houses made from
thin sheets of wood or other material (baraccopoli).
CARDBOARD: stiff thick paper, used especially for making boxes (cartone).
ENCAMPMENT: a large temporary camp, especially of soldiers (accampamento).
RIOT: a situation in which a large crowd of people are behaving in a violent and uncontrolled way,
especially when they are protesting about something (sommossa, rivolta, tumulto).
HARVEST: to gather crops from the fields (raccogliere, mietere).
PRODUCE: food or other things that have been grown or produced on a farm to be sold (produzione
agricola).
DROUGHT: a long period of dry weather when there is not enough water for plants and animal to
live (siccità).
FALLOW FIELD: a land dug or ploughed but not used for growing crops (campo incolto, a maggese).
OVERPLOUGHING: the practice to plough intensively (aratura intensiva).
WINDSTORM: a period of bad weather with strong winds but not much rain (tempesta).
STRIP: to remove something that is covering the surface of something else (rimuovere, togliere).
TOPSOIL: the upper level of soil in which most plants have their roots (terreno, strato superficiale).
CROP: a plant such as wheat, rice or fruit that is grown by farmers and used as food (coltivazione,
coltura).
LIVESTOCK: animals such as cows or sheep that are kept on a farm (bestiame).
NEARBY: not far away (limitrofo, vicino).
MORTGAGE: a legal arrangement by which you borrow money from a bank or similar organization
in order to to buy a house, and pay back the money over a period of years (mutuo).
EVICT (FROM): to tell someone legally that they must leave the house they are living in (sfrattare).
RELY (ON): to depend on something in order to continue to live or exist (dipendere da, dover fare
affidamento su qualcosa o qualcuno).
SOUP KITCHEN: a place where people with no money and no homes can get free food (mensa per i
poveri, cucina benefica).
HANDOUT: money or goods that are given to someone, for example because they are poor (sussidio).
ACCOMPLISH: to succeed in doing something, especially after trying very hard (raggiungere,
compiere).
PHRASAL V ERBS
DRIVE OUT: to force someone or something to leave (cacciare via, allontanare, disperdere).
BREAK UP: to make people leave a place where they have been meeting or protesting (cacciare,
disperdere).
KEEP UP: to continue doing something (continuare, portare avanti).
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The Wall Street Crash and the Great Depression
3. The New Deal
The Republican President, Hoover, had failed to deal with the Depression successfully. He tried to
introduce measures to help the economy like tax reductions, an expansion of public works, and
the Federal Home Loan Bank Act. However, his idea that people would be able to “work
themselves out of poverty” without direct assistance from the government was very unpopular.
When Roosevelt accepted the Democratic Party nomination for president, he promised a “New
Deal” for Americans, which proved popular with the electorate. On the 4th March 1933,
Roosevelt became President of the United States of America. He now had to deliver his promised
New Deal to the American people. This had three main aims:
1. Relief - to help to improve the lives of people;
2. Recovery - to begin to rebuild American industry and trade;
3. Reform - to change conditions to ensure future progress.
It was also important that confidence was restored in banking and finance. Roosevelt
implemented a four-day “Bank Holiday” which closed the banks until they had been regulated.
The Emergency Banking Relief Act gave the government strict control over the banks. Only
healthy banks were allowed to reopen and the other weaker banks were reorganized under Federal
supervision. The stock market was to be monitored
more closely and the USA was taken off the Gold
Standard. In order to win over the American people,
Roosevelt gave speeches known as “fireside chats”
where he asked Americans to have faith in the New
Deal. He also introduced several Federal agencies
(sometimes called alphabet agencies because they
were known by their initials) to combat the effects of
the depression.
The economic programs outlined in the New Deal,
were implemented in the United States between 1933
and 1936. During the first hundred days of his
presidency, Roosevelt passed many laws to try and
end the crisis of the Great Depression and restore
American confidence. In his New Deal, Roosevelt put
into practice some of the theories of the British
U.S. President Franklin Delano Roosevelt
Economist, John Maynard Keynes. Historians
distinguish a “First New Deal” (1933) and a “Second New Deal” (1934-36). The “First New Deal”
(1933) dealt with diverse groups, from banking and railroads to industry and farming, all of which
demanded help for economic recovery. A “Second New Deal” (1934-36) included the Wagner Act
to promote labour unions, the Works Progress Administration (WPA) relief program, the Social
Security Act, and new programs to aid tenant farmers and migrant workers. The final major items
of New Deal legislation were the creation of the United States Housing Authority and Farm
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The Wall Street Crash and the Great Depression
Security Administration both in 1937, plus the Fair Labour Standards Act of 1938 which set
maximum hours and minimum wages for most categories of workers and the Agricultural
Adjustment Act of 1938.
While there was no attempt to end segregation or to increase black rights in the South, Roosevelt
appointed an unprecedented number of African Americans to second-level positions in his
administration; these appointees were collectively called the Black Cabinet. The African American
community responded favorably, so that by 1936 the majority who voted (usually in the North)
were voting for the Democrats. Some New Deal relief programs allocated a part of their budgets
to blacks. At that time, social security was denied to African Americans and most unions excluded
them from joining.
To increase popular support for his New Deal, Roosevelt put an end to prohibition, the national
ban on the sale, manufacture and transportation of alcohol which had been in place since 1920.
Once the manufacture and sale of alcohol was legalized, states and cities gained additional new
revenue through taxes on sales and Roosevelt secured his popularity in the cities for ending this
unpopular ban.
The New Deal represented a significant shift in domestic policy in the USA, its most lasting
change being the increased federal government regulation of the economy. It marked the
beginning of complex social programs and the growing power of labour unions. Some
businessmen and the Republican Party thought the New Deal had gone too far. Roosevelt’s critics
said it had made Americans too dependent on government help. Some business men were not
happy about high taxation of the rich and also unions in the workplace. The Supreme Court was
also against the New Deal as many judges were Republicans and they declared that several New
Deal measures were unconstitutional. The effects of the New Deal remain a source of controversy
and debate amongst economists and historians.
KEY CONCEPTS
Federal Home Loan Bank Act (1932) - A United States federal law passed under President Herbert
Hoover in order to lower the cost of home ownership.
Emergency Banking Relief Act (1933) - An act passed by the United States Congress in 1933 in an
attempt to stabilize the economy because of the Great Depression. Following his inauguration in
March 1933, President Franklin Roosevelt set out to rebuild confidence in the nation’s banking
system, first declaring a four-day banking holiday that shut down the banking system, including the
Federal Reserve. This act restricted banks from reopening from the banking holiday unless they had
enough funds to meet their depositors demands. Reassured that banks were now safer to keep money
in than before, people started to put their trust in banks again, and the bank system steadily grew.
Gold Standard - An economic system in which the value of money is based on the value of gold.
Prohibition - The Eighteenth Amendment to the U.S. Constitution banned the sale, manufacture
and transportation of alcohol from 1920 until its repeal in 1933. Prohibition had been introduced for
four basic reasons; medical, economic, social and political. People began to realize that alcohol
damaged health. Many labourers got drunk and so they could not perform their jobs properly. Votes
were won in rural areas because politicians promised to back prohibition, which helped those
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The Wall Street Crash and the Great Depression
politicians to win the election. Some husbands were spending their family’s saving on alcohol instead
of essential items, e.g. education. Prohibition ended the legal sale of alcohol and thereby created
demand for an illicit supply called Bootlegging. However, during Prohibition, people continued to
produce and drink alcohol, and bootlegging helped foster a massive industry completely under the
control of organized crime and drinking in speakeasies (places where you could buy and drink alcohol
illegally) became increasingly popular.
MEANING OF …
DEAL: an agreement or arrangement, especially in business or politics, that helps both sides involved
(accordo, patto, riforma, programma).
PROVE: the way that a particular project is organized by a company, including which part of a project
someone is going to do and when they are supposed to do it (dimostrarsi, rivelarsi).
DELIVER: to do or provide the hints you are expected to, because you are responsible for them or
they are part of your job (mantenere, eseguire, portare a termine, compiere).
AIM: something you hope to achieve by doing something (obiettivo, scopo).
RELIEF: money given by the government to help people who are poor, old, unemployed etc (soccorso,
aiuto finanziario).
RECOVERY: the process of returning to a normal condition after a period of trouble or difficulty
(ripresa).
WEAK: not financially successful (debole, fragile).
FIRESIDE: the area closed to or around a small fire, especially in a home (focolare domestico).
OUTLINE: to describe something in a general way, giving the main points but not the details
(delineare, tracciare).
TENANT FARMER: someone who farms land owned by someone else (fittavolo, contadino affittuario).
ATTEMPT: an act of trying to do something, especially something difficult (tentativo).
APPOINT: to choose someone for a position o a job (incaricare, designare, nominare).
ALLOCATE: to use something for a particular purpose, give something to a particular person etc,
especially after an official decision has been made (stanziare, assegnare, destinare).
DENY: to refuse to allow someone to have or to do something (negare, non concedere, rifiutare).
BAN: an official order that prevents something from being used or done (divieto, bando, proibizione).
BE IN PLACE: to be in effect (essere in vigore).
GAIN: to manage to achieve an increase of something (aumentare).
REVENUE: money that a business or organization receives over a prior of time, especially from
selling goods or services (entrate).
SHIFT: a change in the way people think about something, in the way something is done etc
(cambiamento).
DOMESTIC POLICY: policy relating to your own country (politica interna).
PHRASAL V ERBS
DEAL WITH: to take the necessary action, especially in order to solve a problem (affrontare).
WORK OUT: if a problem or complicate situation works out, it gradually gets better or gets solved
(tirarsi fuori, risolvere).
WIN OVER: to get someone’s support or friendship by persuading them or being nice to them
(persuadere, convincere).
DEAL WITH: to be concerned with (occuparsi di).
KEEP UP: to continue doing something (continuare, portare avanti).
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