The downward spiralThroughout the 1920s, the stock market had gradually become detached from the national economy and existed in its own speculative bubble. This speculation and the investment of immaterial borrowed money saw stock prices rise uncontrollably - for years, lenders were able to depend on future returns for their loans to be paid back, but when the markets crashed in 1929 borrowers were then unable to repay and the banks began to fail. When this happened, those with savings still in the bank generally lost it all. Many banks had also invested funds in the stock market directly, which exacerbated their position further, and the period of frivolous borrowing and lending came to an abrupt end.
Because of these developments, the economy went into a downward spiral; businesses dependent on loans struggled to pay wages or overheads; the property market crashed as people could no longer repay or take mortgages; and rising unemployment or fear of unemployment meant that people stopped spending. All of these factors, alongside falling stock prices, fed into one another and the economic situation deteriorated further. Many Americans who had invested their savings in stocks relied on these returns for their pensions, but they also lost everything.
Herbert HooverHerbert Hoover was elected president by a landslide in 1928. The former U.S. Secretary of Commerce had been elected on a platform of continuing the prosperity and economic boom of the previous administration. However, the stock market collapsed within a year of his inauguration and many at the time blamed Hoover for causing or not preventing the Depression, while his subsequent actions are seen as contributing to further economic decline.
During the crash, Hoover assured the public that the crisis was temporary and that the markets would bounce back; this failed to materialize. He also pursed policies of non-intervention, believing that federal involvement would weaken private industry and prevent recovery; when federal stimulus packages were eventually released they were directed towards major businesses, while little to nothing was directed toward the unemployed. In a move that would ultimately do little to ease difficulties in the U.S., Hoover repatriated U.S. loans that had been sent to Germany to aid its economic recovery after WWI, destabilizing its economy and causing it to become the hardest-hit country during the Depression. Additionally, Hoover raised tariffs on international trade in an attempt to bolster U.S. domestic trade, but other countries raised tariffs in response and the depression grew worse across the globe.
Agriculture hit hardIn the U.S., the Depression hit the rural population much harder than those in the cities. Very few farmers or agricultural workers were in a position to take part in the stock market in the 1920s, due to the farm crisis that followed the First World War (high production was no longer needed, causing crop prices to fall while production costs remained high). Because of this, those in the agricultural sector were already struggling throughout the 1920s, and things got worse during the Depression. Eventually, a scenario emerged where agricultural returns were so low that farmers could not afford to take their wares to market, and significant amounts of produce were destroyed or spoiled as a result - all while much of the population was going hungry.
In the 1930s, much of the Southern Plains was also hit by drought and dust storms (known as the Dust Bowl), resulting in crop failure. As in the cities, many farmers had their homes repossessed by the banks, or could not afford to pay rent, and eviction rates were high. The concept of a penny auction emerged at this time; this was where a farmer’s home was repossessed and then auctioned, but the farmer’s neighbors would gather at the auction, intimidate potential buyers, win the auction with a bid of a few pennies, and then return the property to the original owner; however, this was not the norm, especially for Black farmers and sharecroppers who had no leverage. Due to these factors, hundreds of thousands of farm workers and their families migrated westward from the Southern and Midwestern states in search of opportunity, while many who had moved to cities before the crash felt forced to return home.
Depression in urban areasThe lack of a federal welfare system meant that there was no safety net for the unemployed, leaving people with little choice but to leave home each morning in search of work they were unlikely to find. In major cities, blue and white collar workers alike became jobless in droves, and millions became dependent on religious organizations, private charities, and soup kitchens. Even those who remained in employment saw their wages drop significantly. Rents were lowered in order to maintain some form of income for landlords, but evictions were commonplace, and upwards of two million people (roughly 1.5 percent of the total population) were homeless during the Great Depression. Homeless shelters became overwhelmed, and settlements known as Hoovervilles (named after the president) popped up all over the country - these were shanty towns, usually of tents or small dwellings made from scrap materials, and the largest Hoovervilles were home to tens of thousands of people.
In a similar fashion to rural areas, where people went hungry despite a surplus of food; in cities, thousands of families became homeless despite an abundance of empty housing, people were freezing as warehouses lay full of unsold clothes, and industrial production was at a bare minimum while a quarter of the population was unemployed. All of this contributed to widespread public dissent, and anti-government or pro-labor movements gained momentum. The government was heavy handed in its response to these movements and on several occasions it deployed the U.S. Army to put down protests; this sometimes resulted in protestors (including children) being killed or severely wounded, which spelled the end of the Hoover administration. In the 1932 election, Hoover was then defeated in a landslide, in the largest swing in U.S. electoral history, losing 34 of the states he had won in 1928. Franklin D. Roosevelt then ascended to the presidency in March 1933, from which point the United States' recovery from the Great Depression began.