The Great Depression Begins, 1929-1932

making investments in hope that prices will go up, peild a quick windfall

speculation

when many depositors decide to withdraw their money at one time

bank run

The stock market took its steepest dive on October 29, 1929, the day now known as

Black Tuesday

the biggest drop of the 1929 stock market crash

Black tuesday

The group of World War I veterans who marched on Washington in 1932 was called the _________________________.

Bonus Army

reluctantly signed by President Hoover to supply relief funds to states

Emergency Relief and Construction Act

True or False: "Okies" were usually farmers who sold their land and used the profits to travel to California and begin new lives.

False

True or False: The Depression improved steadily during President Hoover's administration.

False

painter of the 1930s who was part of the regionalist school

Grant Wood

What was Herbert Hoover's philosophy of government?

Hoover believed in a limited role for government. He did not support federal intervention in the economy or federal involvement in public relief. Hoover believed that the American system of "rugged individualism" would keep the economy moving. If relief programs were needed, he believed that state and city governments, along with charities and religious groups, should be responsible for them.

During the Depression, newly homeless people put up communities of shacks that they called

Hoovervilles

The stock market crash weakened the nation's banks because

banks had invested their deposits in the stock market.

Stock prices first began to decline in late 1929 because

Investors began to sell their stock.

Why did creditors foreclose on nearly one million farmers between 1930 and 1934?

Many farmers had heavily mortgaged their land to pay for seed, feed, and equipment. When the farmers were unable to repay these loans, their creditors moved to seize their lands through foreclosure.

set up in 1932 to allow the government to make loans to businesses

Reconstruction Finance Corporation

The first feature-length animated film was

Snow White and the Seven Dwarfs.

During the Depression, charities set up ____________________ to give poor people meals.

Soup kitchen

____________________ invested in stocks, betting that the market would continue to climb so that they could make a quick profit.

Speculators

Describe the effects of the stock market crash of 1929 on American banks.

The stock market crash severely weakened the banks. Banks had loaned a great deal of money to speculators and had invested in the market as well. That money was now lost. The crash was a key factor in causing banks to begin closing.

Explain how buying stocks on margin worked in the late 1920s, and describe the risks and rewards of this investment practice.

When buying stock on margin, investors made only a small cash down payment—as low as 10 percent of the price. For example, with a $1,000 down payment, an investor could buy $10,000 worth of stock. The other $9,000 would come as a loan from a stockbroker. If the stock price then rose to $12,000, the investor could sell the stock, pay off the loan, and make a quick $2,000 profit on the $1,000 investment. However, if the stock price dropped, the broker could demand that the investor repay the loan at once. This created problems for the investor. For example, if the stock dropped and the investor sold for $8,000, he or she would still have to come up with $1,000 to pay off the $9,000 loan. Not only would the initial $1,000 investment be lost, but with this additional $1,000, the investor's total loss would be $2,000. Worse still, the investor might not be able to repay the loan at all.

writer who showed what characters were thinking before they spoke

William Faulkner

Farmers on the Great Plains began to lose their crops during the Depression because

a terrible drought dried the soil.

President Herbert Hoover did not want the government to create as many new jobs as the millions of unemployed people needed because that would require

increased government spending.

if they remain too low, banks make risky loans and companies expand thoo much

interest rates

President Hoover's image was tarnished by the rout of the Bonus Marchers, as well as by the

lingering Depression

In 1932 President Hoover asked Congress to set up the Reconstruction Finance Corporation in order to allow the government to

make loans to businesses.

stockbroker's demand for immediate repayment of a loan used to buy stock

margin call

President Hoover opposed direct federal relief to the unemployed because he believed that

only state and city governments should dole out relief.

In search of work or a better life, many unemployed people

rode the rails.

To portray life around them, artists and writers of the 1930s often used ____________________ as subjects in their work.

the homeless and unemployed

The Depression had deep roots in the economy of the 1920s, including overproduction, high tariffs, missteps by the Federal Reserve, and

the uneven distribution of income.

As a result of the stock market crash, some banks suffered more losses than they could absorb and

were forced to close.

led the troops that dispersed the Bonus Army

Douglas MacArthur

Explain how farmers hoped that destroying their crops, as described in the graphic, would ultimately help them.

During World War I, prices for agricultural products were high and farmers had expanded production. After the war, prices sank so low that farmers began losing money. By destroying their crops, farmers hoped to cause a drop in supply that might raise prices.

Name two visible signs of the Depression that Frederick Lewis Allen does not mention in this excerpt.

During the Depression, soup kitchens and bread lines that could stretch for blocks were common sights in many American cities. Also, newly homeless people set up shantytowns that they called Hoovervilles.

Describe the art and popular culture of the 1930s, including movies, radio, literature, and visual art.

In the 1930s, many Americans preferred popular entertainment that let them escape the worries of the Depression. More than 60 million people went to the movies every week, and the most popular movies included comedies, musicals—vehicles for child stars such as Shirley Temple—and cartoons. Radio provided entertainment in the home. Comedians such as Jack Benny, George Burns, and Gracie Allen were popular, as were adventure serials and daytime dramas nicknamed "soap operas." While movies and radio programs provided entertainment and distraction, literature and art often tried to portray the reality of life. Writers such as John Steinbeck using the homeless and unemployed as their subjects, and photographers such as Dorothea Lange and Margaret Bourke-White showed how the Great Depression had affected average Americans. New styles of literature and art also flourished, including the stream-of-consciousness novels of William Faulkner and the paintings of the regionalist school.

Based on the excerpt above, describe the circumstances faced by Great Plains farmers who migrated to California during the Depression.

Many farmers lost their land as a result of the Depression and of the drought that turned the Great Plains into a "Dust Bowl." Often, these farmers migrated to California with their families in search of work and a new start. Because many of the destitute farmers came from Oklahoma, they were known as "Okies." In California, the migrants took whatever work they could find harvesting other farmers' crops. Because there were far more migrants than there was work, they were paid very little. Migrants lived in roadside camps, or paid growers exorbitant rents to live in shacks. They remained impoverished.

Stockbrokers who made loans that allowed investors to buy stocks could issue a ____________________ to protect their loans.

Margin call

What mistake did Groucho Marx believe he had made, and why did he feel that way, according to the excerpt?

Marx lost a lot of money in the stock market crash. His broker had told him that he would not face any real risk when he allowed the broker to invest his money in the stock market. Many people were caught up in the speculating on rising stock prices during the 1920s. Eventually the stock prices adjusted down to reflect real economic value, and many people lost a great deal of money. Based on the excerpt, Groucho felt that he had made a mistake when he accepted his broker's assurance that there was no risk and that nothing could go wrong. Instead of carefully picking stocks based on the companies' performance, he allowed himself to get drawn into very expensive speculation.

Discuss three major root causes of the Great Depression that were at work before the stock market crash of 1929.

Most economists agree that overproduction was a key cause of the Depression. Increasingly efficient machinery greatly sped the production of factory and farm goods. Most Americans, however, did not earn enough to buy the flood of goods they helped produce. As consumers bought more goods on the installment plan, the debt incurred forced some to reduce their other purchases. As sales slowed, manufacturers cut production and laid off employees. Jobless workers had to cut back purchases even more, causing business activity to spiral downward. A second cause was the loss of export sales. American banks were making loans to speculators instead of to foreign companies. This, along with the Hawley-Smoot Tariff that dampened foreign sales in the United States, caused foreign countries to buy fewer American products. A third cause was mistakes by the Federal Reserve. Instead of raising interest rates to curb excessive speculation, it kept rates low. This action encouraged banks to make risky loans and encouraged businesses to borrow more money to expand production, adding to the problem of overproduction.

During the Depression, most people were able to enjoy which two popular forms of entertainment?

Movies and radio

migrants from the Great Plains heading west in search of better lives

Oakies

What signs of the Depression might one notice while walking through an American city, according to the excerpt?

One might notice empty buildings and idle factories. Also, the streets might not be so crowded with trucks.

In what ways did President Hoover's philosophy of government hinder the recovery?

President Hoover's response to the Depression was limited by his belief in the limited role of government. He increased funding for public works, but refused to massively increase government spending—which would have been necessary to spur economic recovery. Hoover also believed the government should not step in to help individuals. When Congress passed the Emergency Relief and Construction Act in 1932, Hoover signed it only reluctantly. By then, it was too late to stem the Depression.

In July 1932, Congress overrode President Hoover's veto and passed the Emergency ______________________________ Act, which called for $1.5 billion for public works and $300 million in loans to the states for direct relief.

Relief and Construction

After the Federal ____________________ Board refused to put more money into circulation, President Hoover set up the National Credit Corporation to create a pool of money for troubled banks.

Reserve

Did banks begin closing as an immediate result of the crash?

Some banks closed immediately after the crash, but the graph indicates that bank closings did not become a crisis right away. When the first banks closed, depositors at other banks became frightened that their banks would also close and they would lose their savings. Many depositors panicked and withdrew their money, causing bank runs. By 1932, around 10 percent of the nation's banks had closed, and even more closed in 1933.

Describe how the U.S. economy changed as a result of the stock market crash of 1929 and the Depression. What effects did these economic changes have on the lives of American citizens?

The economy of the 1920s was characterized by overproduction, uneven income distribution, high tariffs that suppressed export sales, low interest rates, and a long bull market. Americans were encouraged to borrow heavily in order to purchase consumer goods and speculate in the stock market. The stock market crash wiped out around $30 billion of wealth, leaving many Americans unable to repay their debts to banks and to stockbrokers. Under the pressure of the crash and of bank runs by nervous depositors, banks began to close. Unable to sell excess goods, businesses began to cut back production and close. Also, agricultural overproduction led to a collapse in prices. These economic changes had a dramatic effect on the lives of American citizens. Business cutbacks and failures left more than 12 million workers unemployed. When banks closed, depositors lost their savings. Indebted Americans lost their homes to foreclosures; farmers, also unable to pay their mortgages, lost their land. Bread lines, soup kitchens, and shantytowns known as "Hoovervilles" became common sights throughout the United States. The Depression was a powerful example of the real impact economic changes have on ordinary people.

True or False: Blaming the president for their plight, newly homeless people established shantytowns they called Hoovervilles.

True

True or False: During the early 1930s, dust storms blackened the skies of the Great Plains for hundreds of miles.

True

True or False: The Dust Bowl occurred primarily because plowed land was left uncultivated and there was a terrible drought.

True

many depositors withdrawing thier money at once

bank run

the result when the government spends more than it collects in taxes

budget deficit

a long period of rising stock prices

bull market

When the Senate voted down a bill that promised an immediate $1,000 bonus to each veteran of World War I, some veterans

camped in vacant buildings in Washington, D.C.

At the time of the stock market crash, the government did not insure bank deposits, so

customers lost their savings if a bank collapsed.

The Reconstruction Finance Corporation marked the first time that the federal government had established an agency to stimulate the ____________________ during peacetime.

economy

companies make more goods than people can buy, causing a decrease in sales

overproduction

Thousands of World War I veterans came to Washington, D.C., in 1932 to lobby Congress to

pass legislation giving veterans their promised bonuses early.

President Herbert Hoover hoped that increasing government funding for public works projects would

provide jobs lost in the private sector.

During the 1930s, many Americans preferred movies, radio programs, and other forms of popular entertainment that

provided a release from daily worries.

As creditors foreclosed on nearly one million farms between 1930 and 1934, some farmers destroyed their crops in a desperate attempt to

raise prices by reducing supply.

When President Hoover ordered the buildings in Washington, D.C., cleared of veterans, the ultimate result was 700 ____________________ chasing unarmed veterans and tear-gassing stragglers.

soldiers

Buying on margin was a method of buying stocks

with mostly borrowed money.