CHAPTER 21: THE

GREAT
DEPRESSION
BEGINS
The Big Picture: The Boom times of
the 1920s had never reached into all
sectors of the economy. In 1929 the
economy’s underlying weaknesses
were exposed when the stock market
collapsed, and the nation plunged into
the worst economic depression in
history.
CHAPTER 21 SECTION 1:
THE GREAT CRASH
Main Idea: The stock market crash
of 1929 revealed weaknesses in the
American economy and helped
trigger a spreading economic crisis.
An Appearance of Prosperity
• The “Roaring Twenties” was a time of impressive and
sustained growth for the economy as a whole.
• The Gross Domestic Product, the value of goods and services
produced in a nation during a specific period, rose by 30
percent.
• The Growth of American manufacturing, especially
the automobile, helped expand the American
economy.
• Unemployment remained very low – around 3%.
• Welfare capitalism helped increase workers sense of
prosperity and well-being.
Stock Market Expansion
• General trend in stocks during the 1920s was upward.
• The value of stocks between 1920 and 1929 quadrupled!
• Since the market never seemed to go down, people began to
act as though it never would.
• Ordinary Americans began to invest in the stock market.
• Stock market growth demonstrated the greatness of
American business – Harding and Coolidge continued to pass
laws that would limit the government interference in
business.
Election of 1928
• Coolidge decided not to run for re-election in 1928,
republicans chose Herbert Hoover for the nomination.
• Hoover had an impressive political record and pledged to
continue to support businesses.
• Elected President in 1928.
Economic Weaknesses
• One of the major weaknesses of the American economy was
the vastly uneven distribution of wealth between the rich and
poor.
• The rich were very rich, the poor were struggling (mainly farmers and coal
miners).
• Americans bought many of their consumer goods on credit,
by the end of the decade most people reached the end of
their credit.
Credit and the Stock Market
• Americans also bought stock on credit, called buying on
margin. Investors would pay off when they sold they stock.
• Brokers began to require lower and lower margins for stock purchases,
giving bigger and bigger loans.
• Very risky for both investors and stock brokers.
• Brokers could force investors to repay their loans if the stock’s value fell
below a certain point - called a margin call.
• Federal Reserve System grew concerned at the economic
activity of buying on credit, especially within the stock
market.
• Made it harder for brokers to offer margin loans to investors.
• Corporations started to provide brokers with the cash to make margin
loans to investors, the practice continued.
The Stock Market Crashes
• On Thursday October 24 investors began selling their shares,
others also began selling their shares.
• As everyone sold their shares the stock market began to decline.
• A group of bankers came together and bought the majority of these stocks
to help prevent a decline.
• Stock market officially crashed on Tuesday October 29, they
called the day Black Tuesday.
The Effects of the Crash
Effects on Individuals
• Investors who had bought on • Stock market crash triggered
margin were in debt to their
stock brokers.
• They were forced to sell their
shares far below what they
paid for them.
Effects on Banks
a banking crisis.
• Many banks had directly or
indirectly invested in the stock
market.
• Banks had given loans to the
stockbrokers to sell stocks on
margin to investors.
• The banks were also in debt.
• Many banks went out of business.
Effects on Business Effects Overseas
• American banks had loaned a
• With money scarce banks
lot of money to European
and investors were unable to
businesses and governments
provide businesses with the
to help them after WWI, they
money needed to help
now wanted this money
industry grow.
back.
• Consumers also spending less
• European businesses and
money on goods businesses
governments did not have the
provided.
money to pay them back.
• Many companies had to fire
workers. • The United States and other
foreign governments started
passing high tariffs to
protect their own industries.
Economic Factors:
Poor distribution
of wealth, reliance
on credit,
consumer
spending dropped,
industry struggled.

Stock
Market
Financial Factors:
Crash
Stock market rise
in mid 1920s,
Buying stocks on
credit, Stock prices
rise to unrealistic
levels.
CHAPTER 21 SECTION 2:
AMERICANS FACE
HARD TIMES
Main Idea: The Great Depression and the
natural disaster known as the Dust Bowl
produced economic suff ering on a scale
the nation had never seen before.
The Development of the Great Depression
• The stock market crisis turned into the Great Depression.
• The collapse of banks affected those people who had trusted
the banks with their savings.
• (Today we don’t have to worry about this because we have insurance to
protect our deposits)
• When people may have suspected that the bank might fail they “ran” to
the bank to take out their money.
• Would force the bank to close.
• Joblessness and poverty severely affected people’s ability to
buy food from already struggling farmers.
• Farmers produced more than they could sell which caused farm prices to
shrink.
• Farmers borrowed money from the banks to buy farm equipment and land.
• Banks demanded their money back.
• Farmers unable to pay back their loans were foreclosed on, or when a bank
takes over ownership of a property from someone who has been unable to
pay their loans.
• As businesses could no longer sell their consumer products they
had to cut off or fire workers.
• Unemployment rose to astoundingly high levels – 25% of America
was unemployed.
• For African Americans the rate was even higher – 50%.
The Human Impact of the Great Depression
• Having a job in the Great Depression meant that you were lucky,
for those that were unemployed they knew it meant they would
quickly be poor.
• There were no government programs to provide food or money to the
poor.
• Relied on breadlines or soup kitchens.
• Most Americans lost their homes, they moved onto the streets
creating communities called Hoovervilles.
• Hoovervilles were a reference to President Hoover who many blamed
for the Great Depression.
• Others became Hobo’s, traveling the country on train lines
attempting to find food or work.
• Most hobos were men, they left behind families they could not support.
• Most people were ashamed of the poverty that they endured
during the Great Depression.
• Men were embarrassed that they could not support their family.
• Rise in suicide rates in the early 1930s.
• Many people felt that the nation had failed them.
Devastation in the Dust Bowl
• In 1931 the mid-west experienced a severe drought, became
known as The Dust Bowl.
• Agricultural practices had stripped
the land of nutrients and made it
very loose.
• Led to massive dust storms, covered
crops and blew into homes .
• Area that was hardest hit was:
Oklahoma, Kansas, Colorado,
New Mexico, and Texas.
• Drought had ruined the farms of many farmers, families just
packed up and moved.
• Travelled along Route 66 to California seeking work in farms and orchards
there.
• Called the migrants Okies, a derogatory word for those moving west.
CHAPTER 21 SECTION 3:
HOOVER AS PRESIDENT
Main Idea: Herbert Hoover came to offi ce
with a clear philosophy of government,
but the events of the Great Depression
overwhelmed his responses.
Herbert Hoover’s Philosophy
• Hoover favored a limited role of government in business.
• Advocated for people to work hard for their money, take
responsibility of their well-being - called this rugged
individualism.
• Hoover believed that businesses should form voluntary
associations with the government that would make the
economy fairer and more efficient – called this plan an
associative state.
• Called conferences with businesses to discuss how businesses
and the government could work together.
• The creation of the Hoover Dam was an associative state
project.
• The federal government provided funding while 6 companies joined to
design and build the dam.
Hoover’s Response to the Great Depression
• Hoover believed that the government should not provide direct
aid but rather provide opportunities to help people help
themselves.
• Hoover used these practices when looking for ways to help
farmers.
• He pushed for a set of loans to create and strengthen cooperatives, or
organizations that are owned and operated by its members.
• Idea was that farmers could buy materials needed for their farms at low
prices.
• Hoover continued this practice after the stock market crash to
encourage industries not to lay off workers but to become a
cooperative – few businesses wanted to cooperate, they were looking
out for their own interests.
• Although against Direct Aid, after the crash of the Stock Market,
Hoover urged congress to pass the Reconstruction Finance
Corporation (RFC) that would authorize up to $2 billion in direct
government loans to struggling banks, insurance companies,
and other institutions.
• Hoover also pushed for the Federal Home Loan Bank that would
encourage home building and reduce the number of home
foreclosures.
• In 1930 Hoover signed the Smoot-Hawley Tariff Act that would
raise the cost of imported goods for American consumers,
making it more likely that they would buy cheaper American
goods.
• European nations responded with high tariffs, limited international
trade.
The Nation Responds to Hoover
• Voters were angry with Hoover for his optimism about the
economy – he thought that things would get better.
• He made statements like “the worst is over” and praised industry for
keeping their employees.
• American’s began to question his compassion, Americans needed direct
aid.
• Congress refused to approve payment to a group of veterans
from WWI, veterans then marched on Washington – called
themselves the Bonus Army.
• The marchers were met with violence in Washington, armed soldiers
were fighting with unarmed veterans.
• Hoover opposed paying the Bonus Marchers because of concern with
the federal budget – he would have to raise taxes to pay the marchers.
• Voters blamed the largely republican Congress for the Great
Depression, began to vote in more democrats.
• In the 1932 Election Hoover would have a hard time winning back
voters, Franklin Roosevelt would become president.