The Beginning of the
Great Depression
Price Support
 Credit
 Alfred E. Smith
Dow Jones Industrial Average
 Speculation
 Buying on Margin
 Black Tuesday
 Great Depression
 Hawley-Smoot Tariff Act
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Industries
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Railroad, textiles, and steel were
facing more competition
Mining and lumber were also facing
tough competition and were not
needed as much as they once were
Housing market began to fall
Agriculture
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Prices for wheat and corn rose during the
war
Farmers planted more to make a larger
profit
– Bought new equipment on credit
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Annual farm income began to decline
– 1919 $10 billion to 1921 $4 billion
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Farmers began to default on their loans and
banks began to fail
Save Us!
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Congress tried to create the McNaryHaugen bill that would have allowed
for price support
– The government would buy surplus crops
at a guaranteed price and then sell them
on the world market
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Cotton, corn, tobacco, wheat
Pres. Calvin Coolidge vetoed the bill
twice
Deeper Down
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Since farmers had more debt they had less money
to spend
This had a trickle down effect
Many Americans were buying on credit
– Buy now, pay later with interest
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When faced with debt, people spent less money in
order to pay off debt
Only 5% of the population earned $10,000 or more
per year
70% of the population earned $2500 per year
Election of 1928

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Secretary of Commerce Herbert
Hoover
Alfred E. Smith
– Governor of New York
– The first Roman Catholic to run for
president

Hoover won based on the past success
of his party
Stock Market

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Some people invested their money in the
stock market
The Dow Jones Industrial Average is used
as a barometer of the nation’s economic
health
– Based off of the prices of 30 large firms traded
on the NYSE

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The market rose steadily through the 20s
About 3% of the nation owned stocks
Stock Market cont.

Many people were involved in speculation
– Buying high risk stock with a high interest rate

Others were buying on margin
– Paying a small percentage of the stock price as a
down payment and then borrowing the rest

There was little gov’t regulation of the stock
market
CRASH!!
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Early Sept. 1929 stock prices began to fall
Investors quickly began to sell their stock.
Oct. 24 the market took a plunge
October 29, 1929 Black Tuesday
16.4 million shares of stock were dumped
People who had bought on margin were left with a
huge debt but not product to show for it
Other people lost their savings
By mid-November $30 billion had been lost
Signaled the beginning of the Great Depression
The Great Depression
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1929-1940
The U.S. economy plummeted and
unemployment skyrocketed
People began to withdraw all of their money
from banks
1929- 600 banks closed
By 1933 11,000 of the 25,000 had failed
The government did not protect or insure
banks
The Great Depression
cont.

1929-1932 the GNP was cut in half
– $104 billion to $59 billion
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90,000 businesses went bankrupt
Unemployment went from 3% in 1929
to 25% in 1933
Hawley-Smoot Tariff
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Much of Europe was hit by the Depression
as well
The U.S. had difficulty importing European
goods
1930: Congress tried to protect American
farmers and manufactures from foreign
completion with the Hawley-Smoot Tariff
– Reduced the flow of European goods into U.S.
– Made things worse: Europe wouldn’t buy
American products
Causes of the Great
Depression
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Tariffs and war debt policies cut down the
foreign market for American goods
A crisis in the farm sector
The availability of easy credit
Unequal distribution of wealth
The federal government did little to avoid
disaster
– Hoover encouraged Americans to stay confident