Why the economy collapsed after the stock market crash. Hoover and the Crash Chapter 23, Section 1 The prosperity many Americans enjoyed came to a sudden halt in 1929. During the Great Depression, poverty and desperation became a way of life. Despite President Hoover s optimistic outlook, the economy had weakened during the 1920s. Many Americans had bought stocks on margin, gambling that prices would continue to soar. Older industries such as mining, railroads, and clothing manufacturing had declined. So too, had agriculture. They lost their gamble in October 1929, when stock prices began a rapid slide. Brokers who had lent people money to buy stocks on margin called in the loans. Yet stock prices continued to skyrocket. Many people could not pay, so they sold their stocks. Stock prices dropped even more.
On Black Tuesday, October 29, 1929, the stock market collapsed as prices hit rock bottom. The stock market crash alone, however, was not the only symptom of the Depression. Valuable stock certificates were now worthless pieces of paper. Stock market crash Overproduction Great Depression Business failures Many Americans lost everything. Banking crisis Unemployment Two key industries housing and automobiles were hit especially hard. A banking crisis also contributed to the Depression. Overproduction resulted in a huge supply of goods. Many people, however, had cut back on spending. Many people were unable to repay their loans. Banks also lost money on the stock market. Most people who could afford cars or houses had already bought them, so prices fell quickly. When they ran out of money, the banks went out of business.
Business failures added to the deepening crisis. Terrified depositors ran to their banks, demanding their money. With little money, consumers stopped spending. Business profits plunged. Many found that their money was gone. Many companies closed, forced into bankruptcy. With factories and businesses closing, more workers lost their jobs. The Great Depression soon spread worldwide. By 1933, some 13 million people were unemployed. Some resorted to selling apples and pencils on the street. Even those with jobs suffered from pay cuts.
As the Depression worsened, poverty swept across the country. The Depression was especially hard on families. In earlier times, people could rely on their own farms to get by. Couples Fathers Children Now, urban Americans struggled to feed their families. They put off marriage. Many had to leave home in search of work. Children often went hungry. People lined up for food at soup kitchens run by churches and other charities. When they did marry, couples had fewer children. Ashamed, some deserted their families. Many could not attend school. The homeless built makeshift shelters on the outskirts of the cities. Hoover s asked businesses and state and local governments to create work for the jobless. He also established the Reconstruction Finance Corporation. They called the shantytowns Hoovervilles. Funded critical businesses like banks, insurance companies, and railroads Gave money to local governments for public-works projects
Support for Hoover diminished further in June 1932. Struggling army veterans began to demand immediate payment of their bonuses. Hoover refused. Veterans marched to Washington. Congress refused their plea. Government forces fired on the Bonus Army. The little support Hoover had left vanished.