Causes Of The Depression

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Chapter 21 Section 1: Causes of the Depression
SPECULATION- Too much money was being poured into stock speculation
BLACK TUESDAY- They day the stock market crashed
GREAT DEPRESSION- A period lasting from 1929-1941 in which the economy faltered and unemployment soared
HAWLEY-SMOOT TARIFF- Raised prices on foreign imports
Summary
Republican leaders exuded confidence about both their part and their country. The Roaring Twenties had been a Republican decade. Once in office, Presidents watched the country grow increasingly prosperous. As the decade went on, consumption went up, the gross national product went up, and the stock market went up. Times were good in America and they were going to all be better off. Republicans took full credit for this bullish economy, and American heartily agreed. Herbert Hoover came to Americas attention during the world war, first the brilliant coordinator for the Belgium relief program and for the head of the Food Administration. With a solid record of accomplishment behind him, Hoover was a formidable presidential candidate in 1928, but economic troubles started to worry the people. The prosperity of this time was not deep or as sturdy as Hoover claimed. Throughout the US economy, there were troubling signs. American farmers faced difficult times. They made up one fourth of the work force during this time. They had increased their harvest fields and bought more land to put under plow. They also bought tractors and other machines and contracted a huge debt doing this. After the war the demand for American crops fell sharply. Farms were getting bigger and yielding bumper crops at harvest, but they were failing to sell these goods and pay the debts they owed to the banks. The result was a rural depression that affected millions of Americans. Hard pressed to pay their debts, forced to sell in a glutted and competitive world market and confronted by several natural disasters, farmers did not share in the boom of this time. They lived largely on credit from month to month. Any download slide in the economy was likely to hit America’s struggling farmers first and hardest. Some economics observed that soaring stock prices were based on little more than confidence. Prices had no basis in reality. Although other experts disagreed, it became clear that too much money was being put into stock speculation. Investors were gambling often with money they didn’t have, on stock increase to turn quick profits. The stock market began to sputter and fall. Prices peaked and then slid downward in a uneven way. October 24 became known as Black Thursday. With confidence in the stock market failing, nervous investors started to sell stock. On October 29, Black Tuesday, the bottom fell out. More than 16 million shares were sold as the stock market collapsed in the Great Cash. Billions of dollars were lost. Whole fortunes were wiped out in hours. The stock market crash marked the beginning of the Great Depression. Though it did not start the depression by itself, the crash sparked a chain of events that quickened the collapse of the US economy. The country’s banking system was in huge effect. The crisis in confidence frightened depositors for their money and tried to take the money out. Another cause of many bank failures was misguided monetary policy. Banks were not the only instructions to face the harsh financial realities of the depression. Like a snowball rolling down the hill, the problem of production cuts kept getting bigger and bigger. More Americans were loosing jobs and businesses were shutting down. Hoping to reverse the down side, the government moved to protect American products from foreign competition. Congress passed the Hawley-Smoot Tariff. This tariff inspired European countries to retaliate and enact protective tariffs of their own. This was only one of the causes of a depression spreading across the globe. The international economy had largely been funded by the American loans to Europe, but the
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