The Great Depression
Causes of the Great Depression
One cause of the Great Depression is the rise and fall of the stock market. The stock market soared as people began to own more stocks until approximately 10 percent of all Americans had invested money in the stock market. In the late 1920s, many people invested without thinking about the company's earnings and profits. They expected to make money quickly because they thought the stock market would continue to rise. On October 29, 1929, prices took a massive dive in the stock market. This day is now called Black Tuesday. The stock market lost between $10 billion and $15 billion on this day which is considered to be the start of the Great Depression.
After the stock market crashed, banks began to close and people would withdrawal all their money from their banks. The collapse of the stock market meant that banks had to cut back on loans they made because there was less credit available. This also meant that businesses could not borrow as much money as they could before. This helped begin a recession because banks were forced to close when they could not make up the money they had lost. Since the government did not insure bank deposits, people would lose all of their savings if a bank closed. More than ten percent of American banks had closed by 1932.
Another cause of the Great Depression was overproduction. Factories and farms both bought more machinery to increase production so they could make more money. But most Americans did not make enough money with their current wages to buy up the amount of goods being produced. Many people were already trying to pay of large debts for car or other appliance payments, and had to stop buying new products until they paid those off. Because sales were decreasing, companies had to cut down production and lay off some employees. When production was cut at one factory, it would affect the factories where they bought their raw materials from. Then wages were lowered and employees were laid off at those factories as well. It was a chain reaction that caused 26,000 businesses to collapse in 1930.
Life During the Great Depression
Life during the Great Depression was very harsh for most Americans. Unemployment was one of the main issues in American families at this time. At its highest point during the Great Depression, unemployment reached 25% in 1933. Since people were unemployed, they had a hard time finding the money to buy food. Sometimes, soup kitchens would give out free meals to the poor, and the lines could stretch on for blocks. Children of unemployed Americans during this time often had to leave school to help support their families. Many families lost their homes because they could not pay their rent. Sometimes, these families were unable to move, and had to be evicted. Homeless people would then put up shacks on public lands and form small communities. Thousands of people would also sneak onto trains to have a free ride.
The Dust Bowl also contributed to the harsh living conditions of this time. The Dust Bowl was a series of dust storms in the Midwest brought on by farmers who would dry land farm their wheat. It was part of a terrible drought in the Great Plains in the 1920s, and windstorms would blow the dust into the sky for hundreds of miles. If people or animals were stuck outdoors during this dust storms, they would sometimes suffocate from the amount of dust filling their lungs. Farmers were unable to tend to their land, and their fields withered and crop production went down drastically. Many people tried to move westward in this time in search of better land, but usually ended up homeless.
Government Response to the Great Depression
President Hoover made many efforts to boost the morale of Americans, but failed as conditions continued to worsen. Hoover tried to focus on expanding the money supply. He thought this would help banks be able to make more loans. He set up the National Credit Corporation to lend more money to different communities, but this was not enough to meet their needs. He did not believe that the government should support the people, but the federal government eventually passed the Emergency Relief and Construction Act. This act was meant to send out emergency loans to people and businesses that needed it. This program still could not help the worsening stage of the depression and the amount of unemployed Americans continued to grow. Government began to give out meals to the unemployed people in certain towns, which usually consisted of flour, pork, split peas, corn meal, molasses, and cocoa.
Government tried to help with relief, but ended up contributing to the worsening of the depression by laying off some of their employees, and cutting some health care and education programs. The government had a hard time trying to decide how much relief to give to the people. They didn't want the people to become accustomed to the government giving them money because they were worried that the people would not want to look for new jobs. The poor and hungry Americans eventually began to protest because of the awful conditions. Hoover stopped these mobs with the army.