Underlying problems developing

Old industries suffering

Railroads

Government regulation

Competition from trucks, buses, and cars

Textiles

Mills began to move from North to South because of nearness to cotton and non union, cheap labor

Foreign competition

Change in women’s clothing which called for less cloth

Coal Mining

Had expanded to meet wartime needs but when war ended demand dropped off

Oil, natural gas, and hydroelectric power cut demand further

Union wages kept costs of production high

Farmers overproducing

Farmers expanded operations during the war by buying new farm equipment and amazing the world with their rate of production

Paid for expansion with borrowed money

In 1920 the price of many staple crops fell 50%, mostly due to foreign competition

Demand fell

Farmers tried to get out of this by expanding more

Mostly just added to their debt

Output was tremendous but demand came nowhere near meeting it

Rich getting richer and poor getting poorer

In 1929 3/5 of the nation’s wealth was held by 2% of the people

This meant that the majority of the people could not afford to buy products that companies were turning out in great numbers

The rich invested heavily in the stock market as something to do with their great wealth

The less wealthy invested hoping to get rich quick

Many bought on margin

Pay a percentage of the stock’s cost and borrow the rest from a stockbroker

Pay him back when price of stock rises

Drove stock prices artificially high

Herbert Hoover's Presidency

Election of 1928

Coolidge decided not to run

Herbert Hoover

Republican

Secretary of Commerce for 8 years

Alfred E. Smith

Democrat

Catholic

Favored repeal of Prohibition

Hoover won easily because the economy seemed strong

Solid South broke ranks

Signs that the boom was over

Housing starts and other forms of construction were down

Business inventories were three times higher than the previous year

People weren’t buying

Production and prices declined as a result

Farmers had huge surpluses

Stock Market crash

Shrewd speculators saw signs and sold their stock

Joe Kennedy

Most kept buying

In October 1929 prices began to drop

People who bought on margin began to sell to cover their loans

October 29, 1929

Black Tuesday

People started frantically selling their stock before prices went any lower

This went on for two weeks

Millions of shares could not find buyers

By mid November $30 billion had been lost

The Great Depression

Causes

Uneven distribution of income

About half of families lived at or below poverty level

No buying power

Production did not match consumption

Easy credit

Lots of debt

Installment plans

Stock speculation

Banks lent money and many failed when the stock market crashed and life savings were lost

Unbalanced foreign trade

High tariffs lessened buying power of foreign countries to buy American goods

Debt from WWI lessened foreign buying power

Countries retaliated against high tariffs by not buying

Mechanization

Fewer people needed as workers

Machines do not buy goods

Scope

National income(total payments to producers of nation’s goods and services)was cut in half

85,000 businesses closed

400,000 farms lost

6000 banks(1/4 of total) failed

9 million savings accounts wiped out

16 million people(1/3 of labor force) unemployed

Widespread hunger and extreme poverty

People searching through garbage for food

Hobos

Panhandling

Admissions to insane hospitals tripled

2600 schools closed

Drought worsened problems for farmers

Hoover's response

Established some policies to try to help businesses get back on their feet which did not help very much

Opposed direct federal relief

Increase size of government

Weaken self respect

Hoover blamed

Hoovervilles

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