The Great Depression

by Allison Braun

Causes of the Great Depression

     The collapse of the economy that began in 1929 came as a shock to Americans.  In the late 1920s the stock market was experiencing a bull market, which was a long period of rising stock prices.  Because stock prices were at new highs, many people invested in stock.  If stock prices began to fall, investors wanted to buy or sell their stock quickly.  The high stock prices lasted only as long as new investors would put their money into the market.  Eventually the stock market ran out of new investors and it started to fall.  Nervous customers sold their stocks causing the market prices to fall even more.  On October 24, prices dropped so low that the day became known as Black Thursday.  By October 29, stock prices had tumbled even lower and that day became known as Black Tuesday, between $10 billion and $15 billion was lost that day.  A total of $30 billion was lost when the stock market crashed.  That number was equal to the amount of wages Americans earned in 1929.  

Stock prices in the 1920s   

     When the stock market crashed, it also weakened banks that had invested depositor's money into the markets.  Banks lost a large amount of money and started to cut back on the number of loans they made, sending the economy into a recession.  Some banks did not have enough money to cover their losses and were forced to close and their customers lost their money.  Fearing a large number of banks were going to close, people withdrew their money which caused bank runs.  A bank run occurs when many depositors withdraw their money simultaneously.  The large number of bank runs in 1932 caused almost 3,500 banks to close.  

     The stock market crash however, was not the only cause of the Great Depression.  The economy of the 1920s was also a major factor.  Efficient production of goods during this time caused overproduction.  Americans did not earn enough money to buy all of the goods that were produced and sold on the market.  Many Americans stopped buying new items because they had to pay off their debts from items they had already bought on installment plans.  Because Americans weren't buying new goods, manufacturers produced less and less goods and had to lay off workers to cut costs.  Many families failed to support themselves when they lost their jobs because they had little or no savings.  Wealthy Americans that had money decided to save it instead of spending it and putting it back into the economy.   Businesses totaling 26,000 collapsed in 1930.

Depositors who feared their bank would close would withdraw all of their money so they did not lose it.

     If manufacturers had sold more goods overseas, more American jobs might have been saved.  However, other nations did not have enough money to buy American goods or crops.  President Hoover wanted to lower tariffs to encourage foreign trade.  However, the Republicans wanted to decrease foreign competition and protect American business so they passed the Hawley-Smoot Tariff.  This tariff raised tariff rates to the highest level in American history and hurt American businesses because it reduced exports.  

     The Federal Reserve also contributed to the start of the Great Depression.  By keeping interest rates low, banks were encouraged to make risky loans.  The low rates led businesses to believe the economy was still expanding.  Businesses borrowed more money to expand production, causing overproduction.  They then laid off their workers to save money.  The Federal Reserve made matters even worse when they raised interest rates which tightened credit and caused the economy to continue falling. 

Life During the Great Depression

     In 1933 as the Depression grew worse, over 12 million people were unemployed.  Many people went hungry.  If possible, they stood in long food lines to get free meals for their families from private organizations.  Families or individuals who were out of work also lost their homes and had to live in shacks in areas called shantytowns.  People blamed President Hoover for their troubles and called the shantytowns Hoovervilles.  Many homeless people also jumped onto trains and roamed around the United States to try to find work.  These people, also called hobos, would sneak past the railroad police to get onto the trains.  

Shantytowns were also called Hoovervilles.

     Farmers were also faced with a great disaster on the Great Plains.  Because of all of the homesteading that was taking place at this time, farmers had plowed up all of the wild grasses that held the soil's moisture.  Many farmers left their fields uncultivated and when the drought hit the Great Plains the soil turned to dust.  Colorado, southwest Kansas, and the panhandles of Oklahoma and Texas became known as the "Dust Bowl" and many dust storms started there.  During the dust storms, dust covered everything and even buried crops and livestock.  Many people were suffocated if they were caught in the middle of a dust storm because the dust filled their lungs.  The dust was so thick after storms that people scooped up buckets full of dust while they were cleaning their houses.  Even doors were blocked by dust and to get outside people had to climb out their windows and shovel the dust away.    Some farmers were able to keep their land and could avoid mortgaging it.  However, others were not so lucky and traveled to California with their families to start over.  

In 1934 there were 22 dust storms, by 1937 the total number of storms that occurred for the year was 72.

     During the Depression, movies, radio, and comic books became very popular.  Comedies were especially popular because they provided a diversion from the anxieties of daily life.  Over 60 million people in the United States attended movies every week.  Cartoons were loved by many movie goers.  Snow White and the Seven Dwarfs was the first full-length cartoon movie and was produced by Walt Disney in 1937.  Many people also listened to the radio to listen to their favorite daily programs in the comfort of their own homes.  These programs carried over their story from day to day and were sponsored by makers of laundry soaps and nicknamed soap operas.  These popular programs gave strangers something to talk about other than the state of the economy.  Literature and art were also very popular during this time.  Many writers and artists used homeless and unemployed people as their subjects.  Writers developed new writing techniques they used in their novels.  Photographers took pictures to portray how the Depression affected average Americans and painters worked to emphasize traditional American values in their pieces.

"American Gothic" was painted by Grant Wood to highlight traditional American values of people living in the rural Midwest and the South.

Government Response to the Great Depression

     Hoover wanted to downplay the public's fears and also avoid more bank runs and layoffs by urging people to make rational decisions.  He did not think the government should step in and help individuals.  However, he brought together heads of banks, railroads, and other big business, labor leaders, and government officials to develop strategies to strengthen the economy.  Hoover decided to increase funding for government building projects, or public works, to give more people jobs, however, he refused to increase government spending or lower taxes for fear of delaying economic recovery.  

     Many Americans became scared of the rising unemployment rate and blamed the Republicans for the failing economy.  In an attempt to get the economy growing again, Hoover asked the Federal Reserve Board to put more money into circulation, but they refused.  Instead, he setup the National Credit Corporation (NCC) to help banks continue lending money.  This organization however couldn't meet the nation's needs and failed.  Hoover then established the Reconstruction Finance Company (RFC) to make loans to businesses.  The RFC was overly cautious when lending money and failed as well, causing the economy to fall even further.  Even though Hoover was against federal government participation in relief, giving money to poor families, he unwillingly signed the Emergency Relief and Construction Act.  This act  allowed the federal government to provide direct relief funds.

Many people suffered from unemployment and participated in hunger marches in the early 1930s.

     People grew frustrated with their living conditions during the Depression and began to protest.  Many farmers lost money and had to mortgage their land to pay for seed, feed, and equipment.  Creditors took possession of their land and forced their families to leave.  Farmers that remained on their land tired desperately to raise crop prices.  They even burned their crops to reduce the number on the market.  

     Veterans protested as well.  They marched to Washington to lobby a bill to get their bonus payments from the war early.  The veterans camped in large Hoovervilles until Hoover sent the army in to clear the camps.  The troops chased the veterans out of the camps, tear-gassed the ones that lagged behind the rest of the group, and burned the shacks.  Hoover's reputation was severly damaged when the nation found out about the troops assaulting veterans.  Even though Hoover didn't end the economic crisis, he did more than any other president to expand the federal government's role in economics.


Google images

Section 1:

Appleby, J., A. Brinkley, A. Broussard, J. McPherson, and D. Ritchie. The American             Vision: Modern times. New York, NY: Glencoe/McGraw-Hill, 2006. Print.

Section 2:,

Appleby, J., A. Brinkley, A. Broussard, J. McPherson, and D. Ritchie. The American Vision: Modern times. New York, NY: Glencoe/McGraw-Hill, 2006. Print.

Section 3:    wDeal.html

Appleby, J., A. Brinkley, A. Broussard, J. McPherson, and D. Ritchie. The American       Vision: Modern times. New York, NY: Glencoe/McGraw-Hill, 2006. Print.

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