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Unformatted text preview: 10/8/2007 Lecture 10The Great Depression I. Stock Market Crash (October 1929) II. The Great Depression A. Relationship to Stock Market Crash B. Consumer Borrowing C. Hoovers Response D. Hoovervilles III. Dust Bowl A. Farmers in the 1920s B. Depression and Drought C. Black Blizzards D. Exodus to California-The Stock Market Crash occurred October 29, 1929, the last of a series of crashes, known as Black Tuesday. Stocks plunged that morning. Escalating stock prices in the 1920s were not equal to the value of the companies. 16 billion stocks were dumped. The equivalent of $50 billion was lost. There were thousands of sell orders, but there were no buyers. The exchange closed at 11:30am to prevent further panic.-Some people saw the crash coming, but most were taken by complete surprise. In 3 months, the value of stocks were cut in half. The prices continued to fall. In 1929 only about 3% of Americans owned stocks.-This became a problem because the stock market was symbolic of greater problems in the U.S. A number of people took out loans that they could not afford to pay back. Often, people would take out loans to buy stock, wait for the stock to increase in value, then sell the stock and pay off the loan. The stock itself has no intrinsic value, but is strictly market driven.-Banks extended loans for nearly everything in the 1920s. People bought a number of consumer goods on credit. The explosion of consumer purchases was fueled by easy credit. When stock prices began to fall, the banks called in these lender notes. The stock market crash set off a series of these related events that lasted through the 1930s and did not really end until World War II. Banks were unable to pay back what customers had deposited.-President Herbert Hoover had been Secretary of Commerce under Calvin Coolidge. He responded poorly to the Great Depression. In 1930, he said the crisis would be over in 60 days, but events got worse. People quit believing him. Others, such as John Rockefeller, thought the situation would just get better, but the crisis continued. By the end of 1930, the Depression was spread throughout the U.S., there was massive unemployment, and businesses failed. People lined up in bread lines for free food. 25% of the population was unemployed, compared to about 5% today. Americans threw Hoover out of office...
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