SECTION 1: Causes of the Depression
WITNESS HISTORY 
AUDIO
Stock Market Prosperity
As the 1920s roared along, millions of Americans poured their savings into the soaring “bull” market. Excited investors bought and sold stocks based on “tips” from friends or brokers. Many investors amassed huge fortunes on the strength of rising stock prices. Families who had to scrimp and save at the beginning of the decade found themselves fabulously wealthy by its end. In 1929, a prominent magazine printed a poem that captured the essence of America’s market fever:
“Oh, hush thee, my babe, granny’s bought some more shares, Daddy’s gone out to play with the bulls and the bears, Mother’s buying on tips and she simply can’t lose, And baby shall have some expensive new shoes!”
—The Saturday Evening Post, 1929
Objectives
- Discuss the weaknesses in the economy of the 1920s.
- Explain how the stock market crash contributed to the coming of the Great Depression.
- Describe how the Depression spread overseas.
Terms and People
- Herbert Hoover
- speculation
- Black Tuesday
- business cycle
- Great Depression
- Hawley-Smoot Tariff
NoteTaking
Reading Skill: Recognize Multiple Causes Identify the causes of the Great Depression.
Why It Matters During the Roaring Twenties, many Americans enjoyed what seemed like an endless era of prosperity. Then, in October 1929, the mighty bull market crashed. As production fell and unemployment rose, the U.S. economy lurched into a period of dramatic decline. Years after the Great Depression began, many Americans came to see this contraction as a regular feature of the nation’s business cycle. Section Focus Question: How did the prosperity of the 1920s give way to the Great Depression?
Prosperity Hides Troubles
In 1928, Republican leaders exuded confidence about both their party and their country. The Roaring Twenties had been a Republican decade. In 1920, Americans sent Warren G. Harding to the White House, and four years after that they sent Calvin Coolidge. Neither election had been close.
Once in office, both Presidents watched the country grow increasingly prosperous. As the decade passed, consumption went up, the gross national product went up, and the stock market went up. No matter what index an economist chose to consult, the conclusion was always the same: Times were good in America—and they were getting better. Republicans took credit for the bullish economy, and Americans heartily agreed.
Table of Contents