The Depression and the New Deal Causes of the Crash Stock Speculation average Americans were buying stocks with money they didn t have Lack of Diversification the economy relied heavily on three main industries automobiles construction and real estate Declining Demand there was a decline in demand for military and agricultural products as well as in the automobile industry For example by the end of the 1920s most households owned at least one car The problem with this is that they either didn t need a second car or couldn t afford another one so they stopped buying Corporate and Private Debt many individuals were buying things on credit leaving them with a lot of debt Corporations were also buying stocks on credit and borrowing money from banks Because there was no regulation on business they didn t have to give any financial statements If they did release a statement it would lie about how much money they had and how much debt they were in On October 24 1929 the stock market took a huge dip known as Black Thursday Vendors rushed to the stock market floor to buy up 20 million of stocks in hopes of saving the stock market but it didn t work By the following Tuesday most people had pulled out of the market The official crash happened on Tuesday October 19 1929 In fifteen days the stock market lost 30 billion reaching its lowest point on November 13th From Recession to Depression During the depression unemployment rose to 25 and 50 for African Americans Produce prices dropped by 60 and most farmers went into foreclosure There was limited fuel for heat and many riots over food Still entertainment became a way to divert yourself from the depression and the industry continued to grow More and more families owned radios which FDR used to give fireside chats Financial Failures in 1929 Andrew Mellon was the chair of the Federal Reserve System a bunch of regional banks that determined how much money smaller banks could borrow Mellon wasn t enforcing the loan limits because he thought he could weed out some smaller banks Because of this almost all of the banks in America failed People panicked and rushed to their bank to take out all of their money however because banks loan money to other people or invest it they could not give everyone their money back International Factors o The depression was not just and American phenomenon it was happening all over the world During World War I we loaned millions of dollars to European countries After the war we asked Germany to pay reparations but because of the depression they stopped England and France also stopped making payments on their loans o In 1930 Congress passed the Smoot Hawley Tariff to place a tax so high on foreign imports Americans would not want to buy them The tariff mostly affected agricultural products like wheat lumber cotton and tobacco and the tax could be as high as 50 This tariff backfired because it angered other countries who then imposed a tax on our imports Between 1929 and 1933 US exports declined from 5 billion to less than 2 billion The Dust Bowl a very large dust storm caused by over farming of soil and a drought affected many states in the West The dust bowl reached as far north as Boston and as far south as Atlanta however it mostly affected Kansas Oklahoma Texas and New Mexico The dust storms were caused by the erosion of soil and very high winds that resulted in black blizzards Still the farmers kept trying to farm anyways causing dust to fly up into the air April 14 1935 is known as Black Sunday because it was the worst storm of the dust bowl Farmers were mostly affected and some died from dust pneumonia which was dust filling up the lungs and affected livestock as well To avoid the worst most people just moved further west Hoover s Response and the Election of 1932 Herbert Hoover believed in Lassiez faire government and did very little in response to the stock market crash and the depression He believed a downturn in the market was a natural process in capitalism He also didn t want to give government aid as it would encourage people to rely on the government instead of themselves He believed any form of relief should come from charities and corporations As well as vetoing any bill Congress passed to give relief to people he also raised taxes passed the Smoot Hawley Tariff and authorized federal funds to feed livestock but not people Hoover was seen as inadequate and insensitive and when people out west lost their homes they lived in tent cities which they dubbed Hoovervilles By 1932 Hoover saw that his actions weren t working and tried to change his course in 1932 for the new election He passed the Federal Home Loan Banking System which aimed at helping homeowners who were facing foreclosure He created the Reconstruction Finance Corporation who loaned money to struggling banks and the railroad industry Lastly he approved 2 billion of government spending on public works projects like the Hoover Dam However these efforts were a little too late and did not do much for the economy On July 8 1932 40 000 marchers half of which were WWI veterans ascended on the Washington Monument Anyone who had served in the war was promised to be paid a 1 000 bonus in 1945 However because of the depression they demanded that their bonuses be paid early The marchers set up tent cities and stayed for several days Hoover responded by having the veterans physically removed from the grounds of the Washington Monument When he sent in federal troops the site erupted in violence resulting in the death of two veterans Hoover s actions cost him the 1932 election against FDR Franklin Delano Roosevelt was a member of the upper class from New York secretary of the Navy and governor of NY Though a case of polio confined him to a wheelchair he was able to hide his disability For the 1932 campaign FDR promised to repeal prohibition and promised a new deal to help Americans earn a living Roosevelt was very charismatic and embraced the media so he started his fireside chats He was elected into office four times and died as president in 1945 He greatly enlarged the office of the president even more so than Teddy Roosevelt and expanded the domain of the federal government FDR did more in his first 100 days in office than any other president in history The First New Deal Relief After FDR took office on March 4 1933 he created the New Deal which was completed during his first 100 days in office The New Deal drew on the traditions of the progressive era