1. What happened on "Black Tuesday"?
On October 29th, Black Tuesday, the bottom fell out of the market and the nations confidence collapsed.
On October 29th, Black Tuesday, the bottom fell out of the market and the nations confidence collapsed.
2. How did the economic trends of the 1920s in industry, agriculture, and with consumers help cause the Great Depression?
-Industries like railroads, textiles and steel were making little profit. Railroads lost business to new forms of transportation like trucks, buses and private automobiles. Mining and lumbering were no longer in high demand. Coal mining was no longer as important since there were other forms of energy becoming popular such as hydroelectric power, fuel oil and natural gas. An important economic indicator that declined during this time was the number of new houses being built was declining. When this happens, many people's jobs are hurt such as furniture making and lumbering.
-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%. Farmers though that producing more crops would sell more, but this depressed prices further. 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.
-Consumers have less money to spend. Their incomes 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.
-Many people were becoming involved with the stock market. They bought stocks and bonds without ignoring the risks and just thought they might be lucky and become rich. 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. If the value of stocks declined, people who had bought on margin had no way of paying off the loans. In September 1929, stock priced peaked and fell. On October 24, the market plunged and panicked investors unloaded their shares. On October 29th, Black Tuesday, the bottom fell out of the market and the nations confidence collapsed. Many people were stuck with huge debts, and many others lost most of their saving. This signaled the beginning of the Great Depression (1929-1940).
3. According to your reading, what are the major causes of the Great Depression?
-The Crash of the Stock Market
-Uneven Distribution of Income
-Industries in Debt
-Consumers Having Less Money to Spend
22-3-Hoover Struggles With The Depression
9. How did the economy respond to his efforts?
4. What was Hoover
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
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
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.
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