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Section 1
Problems with the Economy -Herbert Hoover elected president in 1928 -Republican -Very pro-business -By 1929, 71% made less than $2,500/year -Industries were becoming more efficient -Produced more goods -Lower class incomes didn’t rise much, though -Buying on credit -Purchase now, pay later -Speculation -Buying and selling stocks quickly in order to make a quick profit -Buying on margin -Got loan for 50-90% of stock price -Use stock profit to pay off loan -Worked as long as prices went up
The Crash -Sept. 3, 1929àStock market reached new high -Prices started going down afterward -Oct. 24àBlack Thursday -Major selling of stock -Oct. 29àBlack Tuesday -Stock market crashed -By November, stock prices were cut in half -Banks started calling in margin loans -People couldn’t repay loans -People withdrew money from accounts -Banks couldn’t cover withdrawals -Went out of business (9,000 by 1933) -No FDIC -Industries started having surplus of goods -People not buying productsàbankruptcies -Beginnings of Great Depression Causes -Stock market crash (1929) -Worldwide economic situation -Mismanaged economy (incomes for poor) -Business cycle -Economy goes up; economy goes down -1920s lifestyle -Buying on credit, speculation
Hoover’s Plan -Did not want govt to interfere (laissez-faire) -Did try to fix problems -Balance budget by cutting spending and raising taxes -Took more money away from people -“Rugged invidualism” -People should help themselves out of hard times, not the government -No because: too much money, dependency -Called on volunteer efforts -Salvation Army / Red Cross -Hoover not doing enough -“Hoover flags”, “Hoovervilles” -Public works projects -Stimulate economy (jobs) -Boulder Dam
Election of 1932 -Franklin D. Roosevelt defeats Hoover in a landslide
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