The Great Depression

By: Morgan Michel

Causes of the Great Depression

          About 10 percent of American households, owned stocks. As things were going good for the investors, they bought stocks on margin, which was making only small cash down payments.  The Stock Market Crash of 1929 was one cause of the Depression. The crash occured on Black Tuesday and two months after the crash, stockholders lost more than $40 billion dollars. Many banks were failing throughout the 1930's. Over 9,000 banks had failed, desposits became uninsured, and many lost their savings. There was reduction in buying across the board as well. As people lost their jobs, they were unable to consistantly keep up with bills and unemployment rates rose to 25%.

         There was also overproduction in goods from farms and factories. However, many people did not earn enough wages to purchase the overabundance. About two-thirds of families earned less than $2,500 a year, so they had little extra money. There became a decrease in sales when paying off installment plan debts on utilities such as refrigerators, when it forced some buyers to stop making new purchases. Manufacturers had to cut production and lay off employees.

          As businesses began to fail, the government created the Hawley-Smoot Tariff to help protect American businesses. It caused high tax rates for imports which led to less trading between America and foreign nations. This failed because other countries responded by raising their own tariffs. By 1932, exports had decreased to about one-fifth of what they were in 1929. This was bad for farmers and American companies. The election of 1928 was another leading event to the Depression. Herbert Hoover ran against Alfred E. Smith, who was a Catholic while Hoover was a Quaker. Protestants believed that since the Catholic church financed Democrats, that it would rule the United States if Smith became president. Hoover wanted to stomp on these ideas and ruin Smith's candidacy. Hoover won the election and said their future was, "bright with hope," which happens to be very ironic.

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LIfe During the Great Depression

         Life during the Great Depression affected people physically and also psychologically. Families were starving which led them to search through dumpsters for leftover food. Many became unemployed, which made life much harder. Teenagers resulted in searching for employment to help out their families and took on many such responsibilities. Half of the African American workers were without jobs during 1932 because they had to make way for more whites to be employed instead. Crop prices dropped, so farmers left many of their fields unused.  

         Later, a drought struck the Great Plains. The soil dried to dust with neither grass nor wheat to hold the large amounts of rainfall. From the Dakotas to Texas, American's wheat fields became a vast "Dust Bowl." Women were encouraged to stay home and perform labor such as canning or sewing so that they could stretch the family budget while the men went out and worked jobs more "efficently." About 25, 568 banks were in operation in 1929. In 1933, only about 14, 771 banks were in operation.

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Government Responses to the Great Depression

         The government increased relief spending which contributed to the crisis by laying off employees and making cuts to education, health care, and other such social programs. The governement had owed nearly $100 million by the end of 1933, mostly to the United Kingdom. The government laid off one-third of its civil servants and lowered wages for the rest. This introduced new taxes that increased the cost of living by 30 percent. The government also doubled its police force in 1932 to maintain law and order. The Newfoundland and Labrador was the goverments way of helping to establish farms, raise animals, and build communities in many uninhabitede parts of the country, unfortunately this ended in failure. The intention of this was to have people eventually support themselves off the land and pay back the government's investment.

          Herbert Hoover requested to Congress to have The Reconstruction Finance Corporation in 1932 to make loans to businesses. This system lent about $238 million to about 160 banks, 60 railroads, and 18 building and loan organizations in the early part of 1932. This program failed because it could not increase lending sufficiency. For this first time in history, the federal government was supplying direct relief funds, although governors of the states had to apply for these loans.

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