1 of 12

The Depression and the New Deal

Chapter 26

Lesson 1

2 of 12

The Stock Market Mania

  • 20’s- U.S. economy great
  • Investing in stock was a national mania
  • Few worried about the risks
  • October 29,1929 - Black Tuesday
  • Stock values plunged - Many lost their savings
  • Millionaires lost fortunes
  • The nation was in crisis

3 of 12

The Market Boom

​

  • Stock exchange is a system for buying and selling stock
  • Value of stock went up in 20s
  • Steep rise in stock prices led many to heavily invest
  • Many bought “on margin”
    • Borrowed money to buy

stock

  • If stock went up, made money
  • If stock went down, owe money

4 of 12

The Market Crash

​

​

  • Sept. 1929 - investors started to worry about the market
    • Began to sell their stocks
  • Lenders demanded repayment
    • More people had to sell stock
    • Stock prices fell
  • Decline continues through October
  • Tuesday, October 29, 1929
    • Black Tuesday
    • Stock prices plummeted
    • Exchange close for days

5 of 12

The Great Depression Begins

​

​

  • U.S. slid into severe economic downturn
  • Business activity slowed
  • GDP dropped from

$104 billion to $58 billion

  • Stock market crash was not the only cause

6 of 12

Economic Weaknesses

​

  • Some experts saw issues coming
  • Farm income shranks
  • Factories producing more goods than people could buy
  • Companies cut wages and laid off workers Workers had less money to buy goods companies suffered
  • Growing gap between rich and everyone else

7 of 12

A Banking and Credit Crisis

  • Borrowed money fueled economic boom of 20s
  • Farmers bought land, equipment, supplies
  • Investors borrowed to buy stocks
  • Banks suffered when loans could not be paid back
    • Thousands closeds
  • Millions of people lost

their savings

8 of 12

Other Nations Affected

​

​

  • 1930-Congress passed Hawley-Smoot Tariff
  • Americans bought fewer imported goods
    • Foreign countries suffered
  • Countries responded by raising tariffs on American goods

Herbert Hoover

9 of 12

Joblessness Spreads

​

​

  • By 1932, 25% unemployed
  • Remained 20% in 1930s
  • Some workers only found part-time work, wages cut
  • People lost dignity as well
  • People waited in food lines, shined shoes, sold apples
  • Homeless lived in makeshift villages - “Hoovervilles”

10 of 12

Hoover Reacts to the Depression

​

​

  • Thought crisis temporary
  • “Cannot be cured by legislative action…”
  • Asked business to not cut wages
  • Asked charities to do more
  • State and local governments, churches, charities provided relief

11 of 12

Hoover Tries to Help

  • Federal spending on public works - highways, parks, libraries
  • State governments were out of money
  • 1932 - Reconstruction Finance Corporation (RFC)
    • Lent money to business
    • State and local programs
    • Did little to help

12 of 12

The Bonus Army

​

​

  • WWI bonus to be paid in 1945
  • Jobless vets wanted it now
  • Marched to D.C. to demand $
  • Congress voted against
  • 2,000 vets remained in the city
  • Clashed with police - 2 dead
  • Hoover called out army to burn encampments
  • Turned public opinion firmly against Hoover