Essential Question: What were the causes of the Great Depression?
I. Causes of the Great Depression
A. Stock market speculation
1. Throughout the 1920�s, Americans continued to invest in the
stock market
2. Many investors were buying on margin
a. Expected to resell stock at profit to pay off loans
3. By late October, a wave of selling caused stock prices to
collapse
4. Market crashed in Oct 1929 (Black Tuesday)
a. Creditors began demanding that investors who had
bought stocks on margin repay their loans.
B. Farmers in trouble
1. After WW I, the demand for crops decreased
a. Many farmers went into debt and lost their farms
b. As farmers incomes fell, they bought fewer goods
-This slowed down the economy
C. An ill-advised tariff
1. Hawley-Smoot Tariff caused economic decline
a. Higher tariffs on agricultural products and manufactured goods
-This was designed to protect farmers and
manufacturers from foreign competition
b. Foreign countries raised tariffs on US products
-This slowed down American trade abroad
D. An uneven distribution of wealth
1. Although average incomes in 1920s increased, incomes of wealthiest families rose higher than the rest
2. This deepening inequality of income distribution slowed
consumer consumption
a. This, in turn slowed the economy
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Chapter 22 Hoover Struggles with the Depression
Essential Question: What was Hoover�s philosophy regarding government intervention?
What were some of the programs proposed by Hoover and how effective were they?
I. Hoover Tries to Reassure the Nation
A. Hoover�s program
1. Rugged Individualism
a. People should succeed through their own efforts
b. Hoover felt handouts would weaken people�s self-
respect
2. Encouraged farmers, industrialists, and bankers to cooperate
to solve each sector�s problems
a. He asked employers not to cut wages or lay off workers
3. Government would provide information, strategies of mutual
aid, occasional loans, and morale-boosting speeches
B. Pursued a more aggressive strategy once he realized that his
program was failing
1. Reconstruction Finance Corporation (1932) made billion available in loans to
failing banks and to corporations willing to build low-cost housing, bridges,
and other public works
2. Federal Home Loan Bank Act (1932)
a. Lowered mortgage rates for homeowners
b. Allowed farmers to refinance their farm loans
3. Hoover was especially reluctant to engage government in
providing relief for unemployed and homeless