The Great Depression
Economic Troubles on the Horizon
Both consumers and farmers were going
into deep debt.
Key industries were struggling to make a
Mining, and timber were no longer in high
Housing sales began to fall leading to a
trickle down effect.
Buying on credit
Keeping up with the Joneses. Even though
Americans appeared to be prosperous they
were in fact living beyond their means.
Easy Credit: Credit during the 20’s was so
easy to come by and many businesses
encouraged consumers to buy products
using installment plans. People began
having trouble making payments.
Uneven Distribution of Wealth
During the 20’s the rich got richer while the
poor got poorer.
By 1920-1929 income of the wealthiest
rose by 75%, while income as a whole rose
The unequal distribution meant that most
Americans could not fully participate in the
prosperity of the 1920’s.
Election of 1928
Herbert Hoover (Republican): Personable
and was able to point to years of prosperity
amongst Republican leadership
Alfred Smith: Democratic challenger to
Hoover easily won. Most Americans happy
under Republican leadership.
Stock Market 101
Companies need money to operate.
The Public buys “shares” in the company. At a
later date they can unload their shares on
someone else in exchange for a profit.
More times than not the public does not have that
kind of money. To get started a lot of people will
borrow money from the bank.
Pros: You can make a lot of money
Cons: it’s risky
Economic Disaster Around the Corner
By 1929 most Americans oblivious to what lay
Dow Jones Industrial Average: Most widely used
barometer of the market.
By 1929 4 million Americans owned stock.
Speculation: buying stocks and bonds on the
chance of a quick profit, while ignoring the risks.
Buying on Margin: Only paying for a fraction of the
stock out of pocket while borrowing the rest.
Stock prices peaked in
September of 1929 and
began to decline.
Panicked investors began
to unload their shares.
October 29, 1929: Record
16.4 million shares sold
$14 billion just
evaporated! By the end of
the week $30 billion lost!
Market did not recover its pre
1929 levels until 1954!
Bank and Business Failures
Stock market crash signaled the beginning
of the Great Depression.
Bank runs: After the crash people panicked
and began withdrawing money from the
Because a lot of banks had their money in
the stock market, many did not have
enough cash to give out to their depositors.
Let’s Do the Numbers
By the end of 1929, 600 banks closed. By
1933, 11,000 of the nations 25,000 banks
Because the government did not insure or
protect bank accounts, millions of people
lost their savings.
In 1929, unemployment was at 3%. By
1933, it had jumped to 25% (not counting
those who still had work, but were under
It Wasn’t Just America
Europe was still trying to make payments on WWI
debt. They relied heavily on Americans buying
their goods. This trade relationship all but
stopped. Germany was hit the hardest.
Hawley-Smoot Tariff Act: Designed to protect
American farmers and manufactures from foreign
competition. Did not work.
Many countries retaliated by raising own tariffs.
Within a few years, world trade had fallen by 40%.
Men wander the streets looking for
Women struggle to survive
The Dust Bowl
Severe drought that
plagued the Great
Plains in the 1930’s.
Plagued by dust
storms and evictions,
many farmers left and
headed on route 66 to
Known as “Okies”
After crash, tried to reassure the nation,
“Any lack of confidence in the economic
future is foolish”.
At first opposed any form of public welfare.
Later he tried to use the government to
Public works programs (Boulder Dam)
Federal Home Loan Bank Act
Later called Hoover Dam
Construction of a dam on the Colorado River.
Financed the project by using the profits from the
sales of the electric power the dam would
In addition to providing electricity, it would provide
water supply, which enable growth in California’s
massive agriculture economy.
Federal Home Loan Bank Act
With re-election looming, Hoover appealed to
Congress for bank reform.
In 1932, signed into law the Federal Home Loan
Bank Act, which lowered mortgage rates and
allowed farmers to refinance their farm loans to
Reconstruction Finance Corporation: Authorized
$2 billion for emergency financing for banks, life
insurance companies, railroads, and other large
In the spring of 1932, between 10,000 and 20,000
World War I veterans arrived in Washington D.C.
Came to support the Patman Bill which was under
debate in Congress.
Patman Bill (approved in 1924) authorized
government to pay a bonus to WWI veterans who
were not adequately compensated during the war.
This bonus was to be paid out in 1945.
Congressman Patman believed should be paid
Hoover Did not
support Patman Bill,
believed the marchers
were not really
veterans but criminals.
Group became violent
when the bill was
struck down. Hoover
sent in troops to
disband the veterans.
Election of 1932
What about Today?
Some people call it the Great Recession
Has lasted longer than previous recessions
in 70’s and 80’s.
Officially began in 2007; some economist
argue it is over.
What is a Recession?
A period of time in
which the economy
slows down, people
lose their jobs, and
consumers cut back on
Why won’t it be another
We learned our lesson….there are more
safeguards in place.
Unemployment insurance, Social Security
payments and larger government at the
federal, state and local levels keep money
flowing into the economy even as
consumers and businesses pull back on
their own spending.
Federal Reserve has pumped money into
the system with lending programs.
During Great Depression, lending of money
But….household and government debt,
Culture of the 1930’s