crash and depression, 1929 to 1933 (chapter 22) the economy of the 1920s
TRANSCRIPT
• Republican Coolidge decides not to run - turn to Herbert Hoover, millionaire, great administrator
• Democrats choose Alfred E. Smith - Machine Politician, N.Y. Governor, Catholic
• Hoover Wins
• “We in America today are nearer the final triumph over poverty than ever before in the history of every land”
• “The poorhouse is vanishing among us”
• Buying on Margin - Speculation - Buyer paid some (margin), borrowed rest from stockbroker who held stock as collateral, and stockbroker borrowed from banks to cover loans to buyers
• Example - General Motors
• Bull Market - “Bull” is someone who expects market to rise “Bear” expects market to fall and profits from lower prices - Bulls dominate in the 1920’s - RCA
• Dreams of Wealth - “Everyone can be a millionaire if they play the market” - Everyone was playing the market
• Agricultural Problems - overproduction was main problem - bought land and equipment for WW I demand, couldn’t pay debts
• High tariff and war debt - foreign nations could no longer afford to sell products and couldn’t pay off war debt - Chain reaction leads to Depression in Europe
• Concentration of wealth - 30% of wealth goes to 5% of population (Rich get richer, poor get poorer)
• Overproduction and credit buying - producing more than could be consumed and installment plan - people living beyond their means buying becomes problem later
• Banks Fail - use depositors money to play the market - Bankruns develop - run to bank to take out money before bank runs out
• Domino Effect - Lose job, reduce spending, cancel orders, sales fall, surplus, unemployment (lose job)
• Economist Roger Babson - 9/29
• “Sooner or later a crash is coming and it may be terrific”
• Market listened briefly and short decline in speculation is called the “Babson Break”
• Margins get called in
• 10/24/1929 - “Black Thursday” prices begin to drop rapidly, tremendous losses
• 10/29/1929 - “Terrifying Tuesday” The Crash - 16 million shares traded (normal is less than 5)
• Rockefeller bought
• At the time of the crash - 1/2 million unemployed
• January, 1930 - 4 million
• January, 1931 - 8 million
• Didn’t believe in direct relief, believed it would make people dependent on the government
• “Rugged Individualism” - people should help neighbors
• 1932 1/3 of people needed charity
• Hoovervilles, bread lines, etc
• Asked for money to build buildings, improve waterways, harbors, and public roads
• Boulder (later Hoover) Dam for irrigation and raise the Colorado River
• Public Works Administration 1931
• Made loans to banks and local and state governments to be used for relief
• Wanted to allow certain key elements of the economy to remain open and provide legal relief programs
• Veterans from Oregon set out for Washington, D.C.
• Seeking WW I bonuses they were not to get until 1945
• Veterans from across the country joined them
• 20,000 total build homes of cardboard and crates across from the White House
• Hoover orders them to disband, sent soldiers, cavalry, tanks, Macarthur in charge - 2 veterans died
• Leads to Hoover’s defeat in the 1932 Election