The Great Depression: Crash Course US History #33

Hi, I'm John Green, this is Crash Course U.S. history

and Herbert Hoover's here, which is never a good sign.

Today we're gonna return to two of my favorite topics:

economics and inaccurate naming conventions.

That's right, we're gonna be talking about the Great Depression,

which was only great if you enjoy, like, being a hobo or selling pencils.

Now some of you might get a bit frustrated today because there's no real consensus about the Great Depression,

and simple, declarative statements about it really say much more about you than they do about history.

Why are you looking at me, Mr Green? I didn't say anything. I thought it.

Because, Me From the Past, you always want things to fit into this simplistic narrative:

she loves me, she loves me not, the Great Depression was caused by x or was caused by y.

It's complicated!

(Intro Music)

Many people tell you that the Great Depression started with the stock market crash in October 1929,

but a) that isn't true and b) it leads people to mistake correlation with cause.

What we think of as the Great Depression did begin AFTER the stock market crash,

but not because of it. Like, as we saw last week, the underlying

economic conditions in the U.S. before the stock market crash weren't all moonshine

and rainbows. The 1920s featured large-scale domestic consumption of relatively new consumer

products, which was good for American industry. But much of this consumption was fueled by

credit and installment buying which, it turned out, was totally unsustainable.

The thing about credit is that it works fine unless and until economic uncertainty increases

at which point POW. That's a technical historian term, by the way.

Meanwhile the agricultural sector suffered throughout the 1920s and farm prices kept

dropping for two reasons. First, American farms had expanded enormously during World

War I to provide food for all those soldiers, and second, the expansion led many farmers

to mechanize their operations. As you'll know if you've ever bought a

tractor, that mechanization was expensive, and so many farmers went into debt to finance

their expansion. And then a combination of overproduction and low prices meant that often

their farms were foreclosed upon . And other signs of economic weakness appeared

throughout the decade. Like by 1925, the growth of car manufacturing slowed, along with residential

construction. And, worst of all was what noted left wing

radical Herbert Hoover labeled "an orgy of mad speculation" in the stock markets

that began in 1927. By the way I'm kidding about him being a left wing radical. Just

look at him. According to historian David Kennedy, "By

1929, commercial bankers were in the unusual position of loaning more money for stock market

and real estate investments than for commercial ventures."[1]

I wonder if we would ever find ourselves in that position again. Oh right we did in 2008.

Anyway, it's tempting to see the stock market crash as the cause of the depression, possibly

because it turns American economic history into morality play, but the truth is that

the stock market crash and the depression were not the same thing. A lot of rich people

lost money in the market, but what made the Great Depression the Great Depression was