GREAT DEPRESSION

CAUSES

Uneven distribution of income-5% of Americans received over 33% of the total income

Stock market speculation-people in all economic classes believed they could get rich by “playing the market” Buying stocks on margin became popular. Investors depended that the price of the stock would increase in order to pay off their loans

CAUSES

Excessive use of credit-belief that the economic boom was permanent led to increased installment buying. Advertising stimulated consumers desire for new products

Overproduction of goods-workers with stagnant wages could not keep up

CAUSES

Weak farm economy-high debt and low prices through the 1920s add severe drought through the 1930s

Government policies-years of neglect would prove hard to correct

STOCK MARKET

September 3, 1929-Dow Jones reached an all time high

Investors doubled their initial money in less than a year

Millions invested and millions lost every thing they had when it collapsed

BLACK TUESDAY

• Thursday, October 24, 1929-group of bankers bought millions of dollars in stock to stabilize market

• This strategy worked for one day, the next Monday the selling began

• Tuesday, October 29, 1929-”bottom fell out” millions of panicky investors ordered brokers to sell and there were no buyers to be found

STATISTICS

• US Gross National Product dropped from $104 billion to $56 billion in 4 years

• Nation’s income declined by over 50%• 20% of all banks closed wiping out 10

million savings accounts• By 1933, unemployment reached to 13

million people or 25% of the nation’s work force

HOOVER’S POLICIES

• Repercussions from the crash were felt worldwide

• Hoover’s first mistake=Hawley-Smoot Tariff (1930)-rates highest in history. Ranging from 31% to 49% on foreign imports to protect American businesses. In turn, European countries made even higher tariffs against American goods

HOOVER’S POLICIES

• By 1931, Hoover takes government action• Federal Farm Board-Authorized to help farmers

stabilize prices by holding surpluses in storage• Reconstruction Finance Corporation-gave loans

to railroads, banks, insurance companies to stabilize businesses believing that the benefits would “trickle down” to the general public

• Believed in “Rugged Individualism”• Did not believe in government handouts

PROTESTS

• Farmers band together to stop foreclosures on land. Formed the Farm Holiday Association which attempted to reverse the drop in prices by stopping the entire crop harvested in 1932 from reaching market

• Effort collapsed after violence

PROTESTS

• In summer of 1932, thousands of unemployed WWI veterans marched to Washington to demand immediate payment of bonuses promised to them in 1945.

• Known as the “Bonus March”• Hoover ordered a break up of the encampment• Use of tanks and tear gas• Two veterans were killed• Americans regarded Hoover as heartless and

uncaring

LIFE DURING DEPRESSION

• Development of a “depression mentality”-an attitude of insecurity and economic concern that remained even in times of prosperity

• Women were forced into the work force and accused of taking jobs from men. Received less pay than men

LIFE DURING DEPRESSION

• Dust Bowl Farmers-severe drought ruined crops in the Great Plains became known as the “dust bowl”

• Many farmers from Oklahoma began to migrate to California-called “Okies”

• Premise for John Steinbeck’s The Grapes of Wrath

ELECTION OF 1932

• Republicans nominate Hoover• Democrats nominate Franklin D. Roosevelt

• Governor of NY• Broke tradition by appearing at the national

convention in Chicago• Promised the American people a “New Deal”• Reminded people of his distant cousin-Theodore

Roosevelt• Roosevelt won with 472 electoral votes to

Hoover’s 59

FIRST HUNDRED DAYS

• Inauguration-March 4, 1933• Called special session of Congress(100 days)• Passed every law requested by FDR• Bank Holiday

• Closed all banks until inspected and found secure by government

• Called The Emergency Banking Relief Act (recovery program)

• Repeal of Prohibition• Fireside Chats-radio addresses

THE THREE R’S

• Brain Trust• After election, FDR puts together a group of

intellectuals, economists, no politicians• Come up with solution

• Three R’s• Relief-people out of work• Recovery-businesses• Reform-change American economic institutions

FIRST NEW DEAL

Recovery Federal Deposit Insurance Corporation

(FDIC)-guaranteed individual bank accounts up to $5000

Home Owners Loan Corporation-provided refinancing of homes to prevent foreclosures

Farm Credit Administration-provided low interest loans to farmers

FIRST NEW DEAL

Relief Federal Emergency Relief Administration (FERA)-offered grants

to state and local governments for forms of relief for unemployed and homeless

Public Works Administration (PWA)-allotted money to state and local governments for building of public works structures. Source for thousands of jobs

Civilian Conservation Corps (CCC)-employed young men on federal projects

Tennessee Valley Authority (TVA)-hired thousands of people to build dams and operate electric power plants. Sold electricity to residents at low rates

FIRST NEW DEAL

National Recovery Administration (NRA)-combined immediate relief and long time reform. Guarantee profits for businesses and fair wages/hours for labor

Agricultural Adjustment Act (AAA)-encouraged farmers to reduce production.

Securities and Exchange Commission (SEC)-created to regulate the stock market

Federal Housing Administration-insured bank loans for building new houses and repairing old ones

SECOND NEW DEAL

Relief Works Progress Administration (WPA)-

provide people with jobs, largest of the New Deal programs employed 3.4 million

Resettlement Administration-provided loans to displaced farmers

SECOND NEW DEAL

Reform National Labor Relations Act- Also known as the

Wagner Act, guaranteed a worker’s right to join a union. Established the National Labor Relations Board which made sure worker’s rights were protected

Social Security Act-created a federal insurance program paid into by employees and employers to build a trust fund that would give monthly payments to retired people over 65.

SUPREME COURT

• Unconstitutional• Declared both the National Recovery Act and the Agricultural

Adjustment Act unconstitutional in 1935• Court Reorganization Plan (1937)• FDR saw his landslide reelection in 1936 as mandate to

reform the court• Plan to add 6 justices to Supreme Court• Critics called “Court Packing”• Both Republicans and Democrats against• First time a bill defeated in Congress• Court backed off New Deal