Directions: Use this TEXT to complete the Causes and Consequences of the Great Depression Questions to Ponder assignment.
The Causes and Consequences of the Great Depression
Weaknesses in the Banking System
- Unwise loans to businesses to expand
- Expanded factories lead to overproduction of goods
- Overproduction of goods leads to low prices for products
- Low prices of products leads to reduction in workforces
- Reduction in workforce leads to less profits
- Less profits means businesses can’t pay back loans to banks
- Unwise loans to people who invested in Stock market
- People invested in the stock market with borrowed money
- If the stocks fail they can’t pay back the loans
- Without the payback of loans banks cannot give customers their money
- Depositors lost money they had in banks, sometimes entire savings
- Banks close (more than 5,000 between 1929 and 1932)
So in short, the #1 Cause of the Great Depression is overproduction of goods
- Creating too much product
- Can’t sell products
- Drives prices down
- Forces layoffs of workers
- Factories close, businesses go bankrupt
Creates a downward spiral of economic systems in the U.S. and worldwide – A crisis
Worldwide problems:
- With a poor U.S. economy imports from other countries are reduced, causing financial strain to them
- U.S. banks can no longer loan European countries money to help rebuild after World War I which leads to unemployment and an economic crisis in those countries
- As a result, European nations could not repay their loans to the U.S. banks
- U.S. investments in other nations (Latin America) suffers which affects those countries.
With the failure of business the United States experiences rising unemployment
- Families suffer
- Marriage and birth rates drop
- Families split up under stress
- Loss of homes, people resort to living in railroad cars or “riding the rails”
Help us Mr. President, Hoover Responds
- President is deeply concerned yet believes the economy will repair itself in time like it always has so he is slow to respond
- Finally, he urges business leaders to keep workers employed and maintain wages
- Calls on private charities to help needy (many refuse to help African Americans)
- Set up some public works programs (authorized building of the Hoover Dam)
- Asked Congress to approve the Reconstruction Finance Corporation to loan money to companies to help them stay in business and employ workers
Depression Deepens – Hoover is blamed
- Unemployment at an all time high
- Shacks where people were living made of cardboard were called Hoovervilles
- Newspapers used to cover up were called Hoover Blankets
- Cardboard used to cover the hole in a shoe was called Hoover Leather
- Thin soup given away at Soup Kitchens was called Hoover Stew
The Bonus Army
- 20,000 jobless veterans from World War I marched to Washington, D.C. to demand their bonuses from the government, the money was promised to be paid in 1945, but veterans needed it NOW!
- They camped in a tent city to wait action by the government
- Congress was split on its decision so the veterans were turned down
- Local police were told to clear the area, when that was met with difficulty Hoover authorized the military to do the job, they attacked the veterans
Americans responded the way they always do, with their votes, TIME FOR A CHANGE, enter FDR and a New Deal for Americans.