The Causes of the Great Depression and President Hoover’s Responses to the Great Depression

The Causes of the Great Depression and President Hoover’s Responses to the Great Depression

    The Great Depression was a period of deep and long-lasting tragedy that placed millions of Americans out of work during the years of 1929 to 1939. This period also marked the beginning of government involvement in the economy, in the society, and in America as a whole. As the Americans were enjoying a decade of prosperity and wealth, also known as the Roaring Twenties, the nation's total wealth was also more than doubled, manufactured goods expanded the economy, there was a low unemployment rate, and shorter hour works which provided more leisure time for the Americans. Americans were also very busy investing in the stock market and being satisfied with the steady increase of the prices of the investments that they ignored and were unaware of the warning signs of a possible fall in the prices of the investments leading to a plunge in the economy. On October 29th, 1929, well known as the Black Tuesday, the stock market crash marked the start of the Great Depression. 

Extravagant parties were held, which showed proliferation of wealth during the 1920s.

   Although there were various causes that contributed to the Great Depression, one of the most important and main cause of such devastating period would be the stock market crash of 1929. Not expecting the prices of the stock to fluctuate and plummet greatly, the Americans were hit with a surprising news that the value of the stocks traded on the New York Stock Exchange had plunged by 9%. Due to the hopeless and sudden plunge in the prices of the stocks, many Americans tried to sell the stocks that nobody was willing to buy. Thousands of Americans who had invested in companies and bought stocks were then left virtually broke. They had lost their entire savings and profit in a short period of time due to the Stock market crash.

The Milwaukee Leader Newspaper that kept people updated on the Stock Market Crash

People gathered up after the Stock Market Crash

   Another cause that greatly affected the Great Depression would be bank runs. As nervous depositors suspected a bank to be in danger of failing and watched the prices of the stocks continuously decrease, they ran to banks and rushed to withdraw all their money. Due to everyone taking out money from the banks, banks experienced a banking crisis and soon went bankrupt as almost every single individual was asking to take out their money, and the banks could not pay everyone who wanted to withdraw their money. In the months following October 1929, bank runs struck across the country. Adding onto the great losses of the individuals, hundreds of banks failed and approximately 350 banks, including big and small banks, closed. These bank failures caused individuals to further lose more money as they were not able to take out their money from the bank and caused banks to wipe out billions of dollars in savings. Therefore,
the bank runs of the people added even more negative consequences to
their existing effects of the Great Depression.

Hundreds of People lined up in front of the bank to withdraw their money.

   One other factor that caused the Great Depression and made it worse was the concept of credits. The installment of credit allowed Americans to purchase stocks more easily, by involving loans from stockbrokers and buying on margins. With the concept of credits, stockbrokers then required lower and lower margins for stock purchases by giving out bigger and bigger loans to the investors. This made it easier for the investors to purchase stocks with paying less money with loans borrowed from the stockbrokers. Because the stockbrokers had margin calls, which was a demand of the stockbrokers to the investors to repay their loans if the stock’s value fell below a certain point, when there was the stock market crash, many stockbrokers had forced the investors to pay for their loans. However, not having been expecting the crash, Americans
also lost most of their money, which led to not being able to repay for their loans to the stockbrokers, which in turn led to the stockbrokers also being broke. Therefore, buying stocks with credits and loans not only caused tragedy amongst the investors, but also the stockbrokers who were not able to receive back their money.

    Moving on from the financial and economical causes of the Great Depression, there was also a weather condition that added onto the causes of the Great Depression. In 1931, the Great Plains entered a long, severe dry spell. Although drought is a part of a weather cycle and is naturally occurring on the Great Plains every few decades, careless agricultural practices had left the region vulnerable by the 1930s. When the wind storms came, they stripped away the topsoil and blew it hundreds of miles away, choking crops and burying farm equipments. These wind dusts blew into homes through windows and under doors, and made living conditions of the Americans worse. People were already  living in hard conditions due to the stock market crash, and the drought and dust storms caused some to move and migrate to other states, even in devastating conditions. 

Dust storms in the Dust Bowl Regions

Dust storms covering up and destroying cars and houses

   The stock market crash, bank runs which then led to bank failures, credits and loans, and the drought all were significant and destructive causes of the Great Depression which initiated and worsened the situations of the Americans during the Great Depression. 

A woman and her children on the streets during the Great Depression

   While the Americans were suffering through the Great Depression, president Hoover, who was the president of America during the time period, was at first strict with his beliefs and perspectives. At first, President Hoover simply refused to accept that the economic crisis was so widespread and so grave, that people could not help themselves, no matter how much they wanted to. Also, he strictly believed that the government should not support the people, favored the federal government that played as little role as possible in the affairs of business, and strongly supported “rugged individualism” which meant people rescuing themselves by their own efforts. Due to his beliefs, President Hoover did not take too many actions, which caused the citizens to blame him as the cause of the Great Depression because of his lack of involvement with the issue.

    However, as time passed and President Hoover recognized how merely sticking to his beliefs was not working and benefitting the people, he introduced a vision of associative states, which was incorporating partnerships between business associations and government. Focusing on associative states, President Hoover carried out his plans for constructing the Hoover Dam, a dam that harnessed the Colorado River to provide electricity and a safe water supply to parts of seven states. The construction of the Hoover Dam was successful as it provided new and more jobs to the people who were jobless and in need of money. Moreover, President Hoover thought that if he called together many of the nation’s top businesses and government leaders to urge them not to lay off any workers or cut wages, the workers would have money to buy goods, and the worst of the Great Depression would pass. Nonetheless, businesses were focused on satisfying their individual goals, they cut jobs and wages, which once again caused the economy to plunge.

    Realizing his mistakes, President Hoover created the Reconstruction Finance Corporation, which provided aid to struggling banks and other institutions during the Great Depression. The Reconstruction Finance Corporation was very beneficial as the loans helped many of the citizens to restart their lives and live in better conditions. Although this program improved the living conditions of many Americans, one of Hoover’s major effort to address the economic crisis backfired badly. Hoping that the high tariff on imported goods make Americans purchase the cheaper American goods, President Hoover created the Smoot-Hawley Tariff Act which raised the cost of imported goods for American consumers. Instead of his intentions and goals, The exceptionally high tariff rates caused other countries to also raise their tariffs, which then caused trade to plunge, and cause less profit made for America. This once again brought America back to poor living conditions and made the citizens view President Hoover as ineffective and not beneficial.

    At first President Hoover did not respond appropriately as he did not believe and provide direct action tothe people. However, after realizing the need for direct action, Hoover did try to create new programs that provided aid to the people. Therefore, although President Hoover had tried to make improvements to the country’s situations, the efforts did not work out, causing citizens
to blame him for not taking action and his failures. 

A picture of President Herbert Hoover

Citations

http://chapter6economictimeline.wikispaces.com/The+Roaring+Twenties

content.time.com/time/nation/article/0,8599,1854569,00.html

http://rowellsapushistory.wikispaces.com/The+Stock+Market+Crash+-+Roaring+20%27s

http://www.thedailysheeple.com/sorry-your-money-is-now-frozen-bank-runs-have-become-illegal_072012

http://www.weru.ksu.edu/new_weru/multimedia/dustbowl/dustbowlpics.html

http://en.wikipedia.org/wiki/File:Dust_Bowl_-_Dallas,_South_Dakota_1936.jpg

http://southcarolina1670.wordpress.com/2011/10/18/how-hoover-caused-the-great-depression/ 

http://www.thisblogrules.com/2012/05/5-us-presidents-dropped-into-sticky-situations-after-being-inaugurated.html

https://www.youtube.com/watch?v=ND0UndNXM8E#action=share