Causes & Early Effects of The Great Depression

1.On October 29th, Black Tuesday, the bottom fell out of the market and the nation's confidence collapsed.

2. How did the economic trends of the 1920s in industry, agriculture, and with consumers help cause the Great Depression?

During WWI, prices rose and international demand for crops like wheat and corn rose. After the war, demand fell and crop prices declined by more than 40%. Many farmers thought that if they increased production of the crops that the prices would go up, but the exact opposite happened. Farm income dropped from $10 billion to $4 billion from 1919-1921. Farmers in debt had difficulty paying it off, causing many rural banks to begin to fail. Congress tried to help with the McNary-Haugen bill which called for federal price-supports for key products like corn, wheat, cotton and tobacco. This meant that the government would buy surplus crops at guaranteed prices and sell them on the world market. President Coolidge vetoed the bill twice.
the Railroads, steel and textile industries were not making much profit. Railroads were losing a lot of business to the newer forms of transportation like trucks, buses and automobiles.Since the newer forms of energy had arisen, coal mining became less needed. One factor that showed how poor the economy was was that the number of houses that were being built had been declining. This had effects on the furniture and lumber industries.
Consumer'sincomes fell and prices rose so they bought fewer things. There was an uneven distribution of income. The gap was widening between the rich and the poor because production expanded faster than wages. Half of the homes in many cities had electric lights or a furnace for heat. One city home in ten had an electric refrigerator. Most americans couldn't fully enjoy the economic advances of the 1920s. During the 1920s, credit was popular, which mean that consumers agreed to buy now and pay later. This created a lot of consumer debt.People decided to join the stock market, but they ignored the risk factor of buying bonds and stocks. People were buying on margin, which meant that they payed a small percentage of a stock's price as a down payment and borrowed the rest. when the people who had bought on margin saw their stock prices declining they were unable to pay it back. In September of 1929 the prices of stocks reached their peak and then hit rock bottom. OOn the 24th of October, the market declined and any investors who had shares sold all of them off.On October 29th, Black Tuesday, the bottom fell out of the markwt and the nation lost all its confidence. Most people who had bought shares were saddled with huge debts. This was the beginning of the Great Depression which lasted a period of 11 years, or from 1929 to 1940.

3.-The Crash of the Stock Market
-Uneven Distribution of Income
-Industries in Debt
-Consumers Having Less Money to Spend

4. What was Hoover’s philosophy of government?

He thought that the governments role was to encourage and facilitate cooperation between competing groups and interests in society. He opposed any form of federal welfare, or direct relief to the needy. He believed that this would weaken people's self-respect.He thought that periods of rapid economic growth were naturally followed by periods of depression. Hoover felt that the government could play a limited role in helping to solve problems.


5. What was Hoover’s initial reaction to the stock market crash of 1929?

President Hoover tried to reassure Americans that the nation's economy was okay. He thought that the important thing was for Americans to remain optimistic and to go about their business as usual. Americans believed that this as a normal part of the business cycle. He called together key leaders in the fields of business and banking and labor and urged them to work together to find solutions. He asked the employers not to cut wages of lay off workers and asked labor leaders not to demand higher wages or go on strike.


6. What was the nation’s economic situation in 1930?

The economy was still shrinking and unemployment was still rising. Many more companies went out of business.


7. How did voters in 1930 respond to this situation?

As the country's economic difficulties kept increasing, the political tide turned against Hoover and the Republicans. Democrats won in the 1930 congressional elections.


8. What did Hoover do about the economic situation?

The Boulder Dam (the Hoover Dam), was a dam on the Colorado River which provided electricity, flood control and a water supply.
He negotiated agreements among private entities, reflecting his belief in a small government. He backed the creations of the Federal Farm Board which intended to raise crops prices by helping members to buy crops and keep them off the market temporarily until prices rose.
He tried to prop up the banking system by persuading the nations largest banks to establish the National Credit Corporation which loaned money to smaller banks which helped them not go bankrupt.
By late 1931, people could see that what he had done failed to turn the economy around, so Hoover appealed to congress to pass a series of measures to reform banking, provide mortgage relief, and funnel more federal money into business investment. In 1932, Hoover signed the Federal Home Loan Bank Act, which lowered mortgage rates for homeowners and allowed farmers to refinance their farm loans and avoid foreclosure.
The Reconstruction Finance Corporation (RFC) authorized $2 billion for emergency financing for banks, life insurance companies, railroads and other large businesses. He believed that the money would trickle down to the average citizen


9. How did the economy respond to his efforts?
The RFC loaned money to large corporations, but business failures continued. This was an example of federal involvement in a peacetime economy, but it was too late.