Causes of the Great Depression
People Spending Money that Didn't Exist
During the 1920's, credit spending became popular among many. Using credit meant that one did not have to pay instantly upon purchasing an item and could pay later. Having such an easily accessible form of payment that made buying items much easier than it had before. However, many were unable to pay back what they had owed.
Technology Brings Down Businesses
New forms of many services that had been used previously brought down the old ones. Coal mining industry fell to new forms of energy such as electricity, natural gas, and hydropower. Housing also fell after the boom in the early 1920's. Companies and services that were related to these companies also fell as they were no longer needed. Railroads had a new competition of automobiles that were now massed produced. For example, Henry Ford had launched the first assembly line in 1913. Since then, many improvement had been made; subsequently, many other automobile industries eventually began copying Ford's assembly line — although not as successful. By the end of the 1920's, more than 15 million Model T cars had been produced. However, this industry also fell in the end. ("Automobiles")
Agriculture also had a downfall. During the World War I, there had been a boom in production to provide for the soldiers. During that time, agriculture had been mechanized. Mass production of crops was easier than before. After the war, food was no longer in a high demand as it had been before while it was still being mass produced. Farmers were unable to sell as many crops causing farmers to be unable to pay back loans that they had taken in purchasing their farm or in purchasing new technology. ("Causes of the Great Depression") The McNary-Haugen bill offered price supports in which the government maintained prices at or above market value. However, it had never been passed even after two tries in 1927 and 1928. President Coolidge had vetoed it twice. ("McNary-Haugen Farm Legislation")
Crash of the Stock Market
Three percent of the population in the United States had owned stocks by 1929. Many of these people had bought stocks based on speculation. They had seen stock prices increasing and naturally assumed that it is the best time to buy stocks. Many were also buying on margin meaning that they had only paid one quarter of the price of their stocks and were borrowing the rest. On September 1929, the stock prices had peaked. From the on, it had began to decline. On October 24, 1929, Black Thursday occurred in that 12,894,650 were traded as people were panicking. Similarly, Black Tuesday on October 29, 1929, 16,410,030 shares were traded. Billions of dollars were lost and it accelerated the depression that was to come.
During the 1920's, credit spending became popular among many. Using credit meant that one did not have to pay instantly upon purchasing an item and could pay later. Having such an easily accessible form of payment that made buying items much easier than it had before. However, many were unable to pay back what they had owed.
Technology Brings Down Businesses
New forms of many services that had been used previously brought down the old ones. Coal mining industry fell to new forms of energy such as electricity, natural gas, and hydropower. Housing also fell after the boom in the early 1920's. Companies and services that were related to these companies also fell as they were no longer needed. Railroads had a new competition of automobiles that were now massed produced. For example, Henry Ford had launched the first assembly line in 1913. Since then, many improvement had been made; subsequently, many other automobile industries eventually began copying Ford's assembly line — although not as successful. By the end of the 1920's, more than 15 million Model T cars had been produced. However, this industry also fell in the end. ("Automobiles")
Agriculture also had a downfall. During the World War I, there had been a boom in production to provide for the soldiers. During that time, agriculture had been mechanized. Mass production of crops was easier than before. After the war, food was no longer in a high demand as it had been before while it was still being mass produced. Farmers were unable to sell as many crops causing farmers to be unable to pay back loans that they had taken in purchasing their farm or in purchasing new technology. ("Causes of the Great Depression") The McNary-Haugen bill offered price supports in which the government maintained prices at or above market value. However, it had never been passed even after two tries in 1927 and 1928. President Coolidge had vetoed it twice. ("McNary-Haugen Farm Legislation")
Crash of the Stock Market
Three percent of the population in the United States had owned stocks by 1929. Many of these people had bought stocks based on speculation. They had seen stock prices increasing and naturally assumed that it is the best time to buy stocks. Many were also buying on margin meaning that they had only paid one quarter of the price of their stocks and were borrowing the rest. On September 1929, the stock prices had peaked. From the on, it had began to decline. On October 24, 1929, Black Thursday occurred in that 12,894,650 were traded as people were panicking. Similarly, Black Tuesday on October 29, 1929, 16,410,030 shares were traded. Billions of dollars were lost and it accelerated the depression that was to come.
Hardships in the Great Depression
Failure of Banks
Banking panics occurred during the Great Depression. The first banking panic was in Nashville, Tennessee, in the fall of 1930. "During, a bank run, a large number of depositors lose confidence in the security of their bank, leading them all to withdraw their funds at once." A bank would have to liquidate (eliminate) and sell its assets, at its lowest prices, to pay back those who withdrew. Similarly, waves of these panics occurred in 1931 and 1932. By 1933, one quarter of the roughly 24,000 banks had failed. ("Bank Run")
Hawley-Smoot Tariff Act
Congress passed the Hawley-Smoot Tariff Act in 1930. It was designed to help farmers and manufacturers by raising the protective tariff. A protective tariff is the tariff placed on foreign goods. This tariff was the highest ever in the United States history. European countries were still recovering from the effects of World War I. This plan had backfired in that European countries also could not buy goods from American companies which, in turn, caused other countries to impose similar taxes. This affected every country's economy in a harmful way. ("Smoot-Hawley Tariff Act | United States [1930].")
Lowered Standards of Living
In cities, many were no longer able to pay their rent or mortgage as they were either laid off or had a lower wage. This, in turn, created shantytowns which were made up of scraps around cities. Support services sprang up to help those who were in need. The number of soup kitchens and bread lines grew. Each helped to provide food to those who were in need. In rural areas farms were struggling to pay their debts. About 400,000 farms were foreclosed during the early years of the Great Depression. Many had to turn to tenant farming in order to barely support themselves. Latinos and African Americans were especially hard hit as racial discrimination was quite strong at the time.
The Dust Bowl
Very little rainfall and over-use of the land eventually led to what is known as the Dust Bowl. Once a long drought and winds occur, the small amount of grass and trees could not hold on to the soil for long. This affected areas from Oklahoma, Texas, Kansas, Colorado, and New Mexico. The Dust Bowl uprooted many families, especially farmers, and sent to California through Route 66. This increased California's population to about a million. ("Dust Bowl")
Broken Family
Men had to constantly search for jobs as unemployment grew. Many left their families and searched all over the country to find jobs. Women were also struggling to help the family. Many took low-paying jobs in textiles or canning foods in order to help the situation. These jobs were usually paid much lower than that of men. Children were also suffering as little food led to malnutrition. The living situations also made diseases more common among families. There was no federal system of direct relief to help those families who were struggling to survive.
Banking panics occurred during the Great Depression. The first banking panic was in Nashville, Tennessee, in the fall of 1930. "During, a bank run, a large number of depositors lose confidence in the security of their bank, leading them all to withdraw their funds at once." A bank would have to liquidate (eliminate) and sell its assets, at its lowest prices, to pay back those who withdrew. Similarly, waves of these panics occurred in 1931 and 1932. By 1933, one quarter of the roughly 24,000 banks had failed. ("Bank Run")
Hawley-Smoot Tariff Act
Congress passed the Hawley-Smoot Tariff Act in 1930. It was designed to help farmers and manufacturers by raising the protective tariff. A protective tariff is the tariff placed on foreign goods. This tariff was the highest ever in the United States history. European countries were still recovering from the effects of World War I. This plan had backfired in that European countries also could not buy goods from American companies which, in turn, caused other countries to impose similar taxes. This affected every country's economy in a harmful way. ("Smoot-Hawley Tariff Act | United States [1930].")
Lowered Standards of Living
In cities, many were no longer able to pay their rent or mortgage as they were either laid off or had a lower wage. This, in turn, created shantytowns which were made up of scraps around cities. Support services sprang up to help those who were in need. The number of soup kitchens and bread lines grew. Each helped to provide food to those who were in need. In rural areas farms were struggling to pay their debts. About 400,000 farms were foreclosed during the early years of the Great Depression. Many had to turn to tenant farming in order to barely support themselves. Latinos and African Americans were especially hard hit as racial discrimination was quite strong at the time.
The Dust Bowl
Very little rainfall and over-use of the land eventually led to what is known as the Dust Bowl. Once a long drought and winds occur, the small amount of grass and trees could not hold on to the soil for long. This affected areas from Oklahoma, Texas, Kansas, Colorado, and New Mexico. The Dust Bowl uprooted many families, especially farmers, and sent to California through Route 66. This increased California's population to about a million. ("Dust Bowl")
Broken Family
Men had to constantly search for jobs as unemployment grew. Many left their families and searched all over the country to find jobs. Women were also struggling to help the family. Many took low-paying jobs in textiles or canning foods in order to help the situation. These jobs were usually paid much lower than that of men. Children were also suffering as little food led to malnutrition. The living situations also made diseases more common among families. There was no federal system of direct relief to help those families who were struggling to survive.
Hoover Struggles with the Depression
Hoover Takes Steps to Help the Depression
Hoover rounded up leaders in business, banking, and labor. He planned out with them wages and hours for their employees in order to help those in need. President Hoover also created a special organization to help private charities generate contributions to the poor. However, none of this helped. More and more businesses went bankrupt, soup kitchens increases, and shantytowns increased.
Anti-Hoover Sentiments Grow
In the 1930 Congressional elections, Democrats took advantage of the growing anti-Hoover sentiment. They took over the House of Representatives and the Senate. They exploited his name by naming places and items that are associated with the poor Hoovervilles or Hoover blankets.
Direct Intervention by Hoover
Hoover appealed to Congress to pass a series of measures to reform banking, provide mortgage relief, and turn federal money into a business investment. In 1932, Congressed passed the Federal Home Loan Bank Act which lowered mortgage rates & allowed farmers to refinance their farm loans and avoid foreclosure. The Glass-Steagall Banking Act separated investment from commercial banking. Reconstruction Finance Corporation (RFC) (Jan. 1932) authorized 2 billion for emergency financing for banks, life insurance, railroads, etc.
Bonus Army
The Patman Bill authorized the government to pay a bonus to World War I veterans who had not been compensated adequately. Congress had approved in 1924, was supposed to be paid out in 1945 in the form of cash and a life insurance policy, but Congressman Wright Patman believed that the money should be paid immediately. Hoover thought that they were communists and criminals. He respected the marchers’ right to peaceful assembly with food & supplies. In June 17, the Senate voted down the Patman Bill. Hoover then called on the Bonus Army marchers to leave. On July 28, a force of 1,000 soldiers under the command of General Douglas MacArthur and his aide, Major Dwight D. Eisenhower, came to roust the veterans. They attacked the veterans. The news of this created more anti-Hoover sentiment.
Hoover rounded up leaders in business, banking, and labor. He planned out with them wages and hours for their employees in order to help those in need. President Hoover also created a special organization to help private charities generate contributions to the poor. However, none of this helped. More and more businesses went bankrupt, soup kitchens increases, and shantytowns increased.
Anti-Hoover Sentiments Grow
In the 1930 Congressional elections, Democrats took advantage of the growing anti-Hoover sentiment. They took over the House of Representatives and the Senate. They exploited his name by naming places and items that are associated with the poor Hoovervilles or Hoover blankets.
Direct Intervention by Hoover
Hoover appealed to Congress to pass a series of measures to reform banking, provide mortgage relief, and turn federal money into a business investment. In 1932, Congressed passed the Federal Home Loan Bank Act which lowered mortgage rates & allowed farmers to refinance their farm loans and avoid foreclosure. The Glass-Steagall Banking Act separated investment from commercial banking. Reconstruction Finance Corporation (RFC) (Jan. 1932) authorized 2 billion for emergency financing for banks, life insurance, railroads, etc.
Bonus Army
The Patman Bill authorized the government to pay a bonus to World War I veterans who had not been compensated adequately. Congress had approved in 1924, was supposed to be paid out in 1945 in the form of cash and a life insurance policy, but Congressman Wright Patman believed that the money should be paid immediately. Hoover thought that they were communists and criminals. He respected the marchers’ right to peaceful assembly with food & supplies. In June 17, the Senate voted down the Patman Bill. Hoover then called on the Bonus Army marchers to leave. On July 28, a force of 1,000 soldiers under the command of General Douglas MacArthur and his aide, Major Dwight D. Eisenhower, came to roust the veterans. They attacked the veterans. The news of this created more anti-Hoover sentiment.