Chapter 1: "The Sight of my Father Crying"

The Great Depression

As President Herbert Hoover took office in 1929, he inherited an economy that seemed to be doing well.   What many Americans did not realize was that many Americans were not doing as well as it seemed.  The problem was the success of the 1920s was built on shaky grounds for four main reasons. First, the economy depended too much on a few industries. Secondly, American workers' wages were still too low to buy the sudden increase in new products available to them. Thirdly, the banking system was unstable due to the large amount of loans being allowed, increasing the average American's debt. Lastly, World War I had caused trade between nations to weaken as nations could not pay off their debt from World War I.

The American economy depended on a small number of very large businesses, mainly construction, coal mining, and the automobile industry.  This was a problem because if one of these major industries had problems or failed, then the impact would affect nearly every region in the United States.  Eventually, many Americans who wanted a car or new home bought one, causing a decrease in new customers.  The sudden decrease in demand, left many of these major industries. with a large number of goods left unsold.  This surplus of goods caused prices to drop.  As prices dropped, businesses made less and less money with each sale.

For the first time, many Americans, whose families only a generation earlier had lived a life of extreme poverty, began increasing their standard of living like never before.  Many workers were not able to afford many of the popular goods due to low wages.  Many Americans began to either borrow money from banks to buy luxury goods, or stores set up payment plans for customers. Over time the "buy now, pay later" approach to buying goods caught up to the American people and businesses.  By 1928, the American people had more debt or money they owed than the United States government spent in a year. 

During World War I, many farmers borrowed money from banks to expand their farms.  Throughout the 1920s, Farmers continued to produce large harvests.   This dramatically increased the supply of crops available to buy.  As the demand decreased in Europe, and the supply increased, the price of crops dropped.  Farmers could no longer pay back their loans, causing many banks to fail.

International trade also impacted the American Economy.  During World War I, many American banks loaned money to the French and the British.  After the war, the allies had to pay back their enormous loans.  In order to accomplish this, the allies began forcing Germany and Austria-Hungary to pay reparation payments.  When the German and Austrian economies began to weaken it caused a domino effect.  Germany began to stop paying their reparation payments, causing France and Great Britain to be unable to pay their debt off to American Banks.

By the middle of 1929, many Americans were worried that the economic growth that was occurring would not last forever.  As a result, many began to sell off their stocks in the Stock Market.  This increased the supply of stocks causing the prices to drop.  As prices dropped, more began to panic that their investments were not worth as much as they thought they were.  Facing falling prices of stocks many Americans rushed to sell.  On Tuesday, October 29, 1929, there was hardly anyone willing to buy stocks, causing prices to plummet leaving thousands of Americans with virtually worthless money.  After what became known as Black Tuesday, many Americans who had invested into the Stock Market could not pay off their debts to banks.  Banks were left with little money to cover the deposits made by everyday average Americans.  A banking panic followed as Americans began to rush to banks demanding their money, only to find that the banks had no money or had closed.  Between 1929 and 1932 more than 5,000 banks had closed, along with them the life savings of millions of Americans.

The period of economic times that followed the Stock Market crash became known as the Great Depression.  As the years continued, the wealth and standard of living many Americans enjoyed throughout the 1920s came to an end.  The United States had experienced depressions before, but due to the Industrial Revolution, most Americans now lived in cities working in factories.  As factories closed and families were left with no income, things were different.  People in the early 1800s could farm for food, but due to urbanization people were left with no way of providing for themselves.

By 1932, nearly one in four American workers were unable to find a job.  Those that could work, worked for less pay than they had throughout the 1920s, and worked fewer hours.  Millions of Americans lost their cars and homes and began selling what they could to survive or begged for food on the streets.  Couples began to delay or decided not to get married.  This caused the birth-rate to drop dramatically.   Children and their parents had to search through the garbage for scraps of food to eat.  Many children were malnourished, or improperly fed, and became ill.   Many schools closed due to a lack of funding, and when they did remain open many teachers worked for little or no pay.

Few presidents before Hoover had ever dealt with an economic collapse like the Great Depression before.  Although Hoover did not cause the Great Depression, he was still blamed by many Americans for the disaster.  Many unemployed workers who lost their homes gathered in shantytowns made of scrap wood and metal, naming these settlements Hoovervilles.  In almost every city park, closed factory, and vacant lots these Hoovervilles appeared.

The Great Depression pushed many Americans into a situation few could imagine.  Many Americans had to become very creative to survive the 1930s.  Over time the tough economic times would come to an end, but only have more than a decade of challenging work from both the U.S. government and every citizen in the nation.