THE GREAT DEPRESSIONTHE GREAT DEPRESSION

Causes of the DepressionCauses of the Depression

Hoover’s ActionsHoover’s Actions

FDR Elected in 1932FDR Elected in 1932

First Hundred DaysFirst Hundred Days

John Maynard KeynesJohn Maynard Keynes• 1936 “General Theory”: Keynesian theory1936 “General Theory”: Keynesian theory

• Economic cycle: 1861,1873,1993,1907,…Economic cycle: 1861,1873,1993,1907,…

• Fiscal Policy (Pres & Con): Deficit financeFiscal Policy (Pres & Con): Deficit finance– During a recession: gov. spending & tax cutsDuring a recession: gov. spending & tax cuts– During a boom: pay off the deficitDuring a boom: pay off the deficit

• Monetary policy (FED): Friedman 1970sMonetary policy (FED): Friedman 1970s– During a recession lower interest rates &During a recession lower interest rates &– increase the money supplyincrease the money supply– During boom: raise interest ratesDuring boom: raise interest rates

THE DEPRESSION STARTS THE DEPRESSION STARTS 19291929Stock Market Crash of October 1929Stock Market Crash of October 1929

- Over speculation in Stocks, Black Thursday: - Over speculation in Stocks, Black Thursday: – Oct 24 $9 billion lost, stocks down 45% Oct 24 $9 billion lost, stocks down 45%

19291929

• Causes of Depression: Causes of Depression: – 1) FED: 10% Margin limit and monetary 1) FED: 10% Margin limit and monetary

policy (rates up 11%, money supply down policy (rates up 11%, money supply down 14%) 14%)

– 2) Congress: Smoot-Hawley Tariff up 60%, 2) Congress: Smoot-Hawley Tariff up 60%, single unit bank laws, international loanssingle unit bank laws, international loans

– 3) President: huge tax hikes 3) President: huge tax hikes

Herbert Hoover 1929-1933Herbert Hoover 1929-1933

HOOVER PRESIDENCY 1929-HOOVER PRESIDENCY 1929-19331933• Historians blamed him for DepressionHistorians blamed him for Depression

• He took more action than any presidentHe took more action than any president

• Lowered taxes, urged credit easingLowered taxes, urged credit easing

• NCC-helped banks, RFC-aided companiesNCC-helped banks, RFC-aided companies

• POUR-volunteers, Farm Board, Public POUR-volunteers, Farm Board, Public workwork

• Depression deepens: GNP down 50%Depression deepens: GNP down 50%– 1932 unemployment 30% - 12 million people 1932 unemployment 30% - 12 million people – Hoovervilles, Bonus March, then raises taxes Hoovervilles, Bonus March, then raises taxes

5190 Bank failures in 19335190 Bank failures in 1933

Unemployment 30% in 1933 Unemployment 30% in 1933

Breadline: widespread Breadline: widespread hunger hunger

““Hoovervilles”Hoovervilles”

Rise of Franklin D. RooseveltRise of Franklin D. Roosevelt• FDR’s BackgroundFDR’s Background

• Election of 1932Election of 1932

• New Deal SpeechNew Deal Speech

• We must try “bold experimentation”We must try “bold experimentation”

• Most gifted politician in American Most gifted politician in American historyhistory

• ““Brain trust,” many smart advisorsBrain trust,” many smart advisors

• Inaugural Address: don’t fear fearInaugural Address: don’t fear fear

• Fireside chats-used radio and press Fireside chats-used radio and press wellwell

Franklin D. Roosevelt: 1933-Franklin D. Roosevelt: 1933-19451945

New Deal Program: WPANew Deal Program: WPA

First Hundred Days: The New First Hundred Days: The New DealDeal• ““Relief, Recovery, and Reform.” Relief, Recovery, and Reform.” • Bank HolidayBank Holiday• National Recovery Adm. (NRA)National Recovery Adm. (NRA)• Civilian Conservation Corp (CCC)Civilian Conservation Corp (CCC)• Agricultural Adjustment Act (AAA)Agricultural Adjustment Act (AAA)• FDR tries to build up gold reserves, tax hikes.FDR tries to build up gold reserves, tax hikes.• Public Works- work ethic: relief and recoveryPublic Works- work ethic: relief and recovery

– CWA: emergency money for 4 million workersCWA: emergency money for 4 million workers– WPA: $5 billion for relief work, artists tooWPA: $5 billion for relief work, artists too– ***PWA: big projects, schools, roads, hospitals***PWA: big projects, schools, roads, hospitals– FDR never spent enough money to “prime the FDR never spent enough money to “prime the

pump”pump”