The Great Depression

By Jonathan Larson

Causes of the Great Depression

The first cause of the Great Depression was the giant crash of the Stock Market in 1929.  The huge amount of optimism  that came with the election of President Hoover also drove up prices of the stock market causing a bull market.  This rise in stock market prices caused approximately 10 percent of American's to invest in stocks.  Many investors had also begun to pay for stocks on margin, or buying stock with only a small cash down payment and borrowing the rest from a stockbroker.  During this time many investors bid prices up without considering a company's earnings and profits, engaging in speculation.  They assumed the market would continue to climb.  Allowing them to sell and make money quickly.  The bull market only lasted as long as there were new investors to put their money into it.  However by the latter half of 1929 the market was running out of new customers.  Inverters sensed danger and sold their holdings.  More people sold their shares to pay the interest on their loans causing prices to plummet.

Many investors had to sell their stocks quickly in order to pay off their loans.

On October 24, now known as Black Thursday, the market began to spiral down.  The following week, on a day now called Black Tuesday, prices took an even steeper dive.  By mid-November, stock prices had dropped by more than one-third.  Almost 30 billion dollars had been lost.

Bank runs take place when many people try to withdraw their money at one time.

The stock market crash also severely hurt the banking system.  Many banks in America had given loans to stock speculators.  Banks had also invested depositors' money in the stock market.  However, when to stock market crashed banks lost money on their investments and people had to default on their loans.  Many banks were simply not able to take the loses and were forced to close.  When people heard of these bank failures they mad runs on the banks, causing even more banks to collapse.  Bank runs take place when many people try to withdraw their money at one time. 

Another cause of the Great Depression was the overproduction of goods.  More efficient machinery caused production of goods to greatly increase, however the wages of workers did not increase to compensate for this.  Americans didn't have the money to buy the huge amount of goods now on the market, many families also had to pay off the high cost items that they had bought on installment plans.  This forced many people to stop buying new items.  With the decrease of sales, many businesses had to cut production and fire workers. 

If more goods had been sold oversees many jobs might have been saved.  However foreign countries were also facing a recession because of World War I.  President Hoover wanted to encourage overseas trade by lowering tariffs, but instead of lowering them, tariffs were raised by the Hawley-Smoot Tariff.  Foreign countries responded to this by also raising their won tariffs causing even fewer goods to be sold overseas. 

Life During the Depression

Once many families lost their jobs they had no way to get food and would often go hungry.  People would stand in bread lines or line up outside soup kitchens in order to get something to eat.  Families were often unable to pay their mortgage and lost their homes.  Many homeless people put up shacks for shelter in public or unused land plots.  Many homeless people would also sneak by railroad police to jump into boxcars on trains looking for a better life.  These people were refered to as hobos. 

Shanty towns were also called Hoovervilles.

During this time there was a large drought in the Great Plains.  Farmers had uprooted many of the wild grasses that held int he moisture in the soil.  When crop prices dropped, many farmers left their fields uncultivated.  Without the crops or natural grasses to hold in the moisture the soil dried and turned to dust.  Wind would blow huge amounts of dust into the sky.  When it finally settled, the dust buried crops and animals.  People would even die from suffocation if they were caught outside.  Many families headed to California and were known as "Okies" because many of them came from California. 

During the Great Depression many people found relief from stress by going to movies.  More than 60 million people went to the movies each week during the 1930s.  Comedies were very popular as they provided a release from daily worries.  As movies entertained Americans, radios offered information as well as entertainment.  Tens of millions of people would listen to the radio on a daily basis.  Daytime dramas were also very popular and came to be known as soap operas because the shows' sponsors were often makers of laundry soaps.

Shirley Temple was a popular actress during the Great Depression.

The 1930s was also a time for literature and art.  Writers and artists both tried to portray the life around them, using homeless and unemployed people as their subjects in their stories and pictures.  Photography was also growing more popular during this time.  Photographers would roam the nation seeking out new subjects.

Government Response to the Great Depression

In order to devise a way to improve the economy, President Hoover organized a series or conferences.  The members of the conferences consisted of the heads of banks, railroads, and other big businesses,  along with labor leaders and government officials.  Hoover attempted to make more jobs by increasing the funding for public works.  The resulting construction jobs only covered a small fraction of the huge amount of unemployed people in the United States.  Hoover didn't raise or lower taxes as he feared that either would delay an economic recovery. 

Hoover also tried to get the economy going again by expanding the money supply.  He asked the Federal Reserve Board to put more money into circulation, but they refused.  Hoover then set up the National Credit Corporation.  The National Credit Corporation, or NCC, made a pool of money which allowed banks to continue lending money in their community.  However this didn't meet the nation's needs.  Hoover then asked Congress to create the Reconstruction Finance Corporation to make loans to businesses.  However the RFC was overly cautious and it failed to increase its lending enough to meet the need. 

Eventually the government was out of options and Congress passed the Emergency Relief and Construction Act in July.  Hoover reluctantly signed the bill.  The act called for 1.5 billion dollars for public works and 300 million dollars in emergency loans to the states for direct relief.  However the program could not reverse the accelerating collapse. 

People soon began to go to rallies and hunger marches that were organized by the American Communist Party.  The prices of crops had sunk so low that farmers also began to protest during the Depression.  Farmers would destroy their crops in a desperate attempt to raise the price. 

Congress had created a 1,000 dollar bonus for each veteran that would be distributed in 1945.  In May 1932 several hundred veterans began marching to Washington to attempt to lobby for passage of a legislation that would authorize early payment of the bonuses.  Once in Washington the number of veterans rose to 15,000.  Many of the veterans returned home when the bill was voted down.  However some stayed in vacant building downtown.  Hoover ordered the buildings to be cleared and the army was eventually called in.  The veterans were chased out of the building by 700 soldiers.  The press coverage of soldiers assaulting veterans harmed Hoover's reputation and hurt him in the 1832 campaign.


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.

"About the Great Depression." About the Great Depression. N.p., n.d. Web. 03 Mar. 2013.

"The Great Depression." A&E Television Networks, n.d. Web. 03 Mar. 2013.

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.

"American Experience: TV's Most-watched History Series." PBS. PBS, n.d. Web. 03 Mar. 2013.

"The Great Depression - Life During the Depression." The Great Depression - Life During the Depression. N.p., n.d. Web. 03 Mar. 2013.

Section 3:

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

"Government Response to the Great Depression: Newfoundland and Labrador Heritage." Government Response to the Great Depression: Newfoundland and Labrador Heritage. N.p., n.d. Web. 03 Mar. 2013.

"Hoover’s Response to the Great Depression." Hoover's Response to the Great Depression. N.p., n.d. Web. 03 Mar. 2013.