Great Depression

Contents

• Causes of the Depression• President Hoover• Dust Bowl• Life During the Depression• Election of 1932• New Deal• Comparing the Presidents• Impact of the Depression

Causes of the Great Depression

1. Stock Market Crash of 1929 2. Bank Failures3. Reduction in Purchasing Across the Board4. American Economic Policy with Europe 5. Drought Conditions

1. Stock Market Crash of 1929 • http://www.history.com/topics/great-depression/videos/1929-stock-market-crash • Black Tuesday (Oct. 29, 1929)

– Market crashes, and 16.4 million shares were traded, beating the record of 12.9 million shares traded on Black Thursday. That was worth $14 billion, or $185 billion in 2011 dollars.

– That was worth $14 billion, or $185 billion in 2011 dollars.• The crash on Black Tuesday set the direction of the stock market, and then the

economy, for the next decade. • In just four days, the stock market dropped 25%. It lost $30 billion, or 40%, in

market value. – This was ten times more than the 1929 Federal budget, and more than the U.S. had spent

in World War I.• By November 13, the day when stock prices hit their lowest point in 1929, over

$100 billion had disappeared from the American economy. – In today's terms, that was worth $1.3 trillion.

1. Stock Market Crash of 1929

• Prominent Bankers attempt to stop crash.– The prominent bankers of the day -- Morgan Bank, Chase

National Bank, and National City Bank of New York -- intervened.

– The banks bought shares of stocks in an attempt to restore confidence in the stock market.• However, this had never happened, and the banks' intervention

signaled other investors to continue to sell, creating continued panic.

• Black Tuesday is widely regarded as the start of the Great Depression, because it signaled a complete loss in confidence in the U.S. financial system.

1. What Caused Black Tuesday?• Part of the panic that caused Black Tuesday resulted from how investors

played the stock market back in the 1920s. – They didn't have as much access to information as they do today. – Stock prices weren't on the computer, they were shown via a tickertape machine.

This machine printed stock prices on a strip of paper.• As stock prices dropped on Black Tuesday, panic ensued because no one knew

how bad it was. – The tickertapes literally could not keep up with the pace of falling stock prices. – By the time someone purchased a certain stock, the prices would have inevitably

changed, and the value would have dropped.• The more shares of a stock that are purchased, the less valuable they are.

• The other reason for the panic was a new way that stocks were bought.– Many investors had placed huge stock orders using money they borrowed from their

brokers, called buying on margin. – When stock prices fell, the brokers called in the loans. Many people found their

entire life savings wiped out to pay off the loan

1. Effects of Black Tuesday on the Overall Economy

• Black Tuesday's losses alone were not enough to cause the Great Depression.

• However, psychologically, it destroyed confidence in the economy. – That's because, in those days, people believed the stock market was the

economy. What was good for Wall Street was thought to be good for Main Street.

• That loss of confidence created a run on the banks.– People withdrew all their savings. – The banks didn't have enough cash on hand, and were forced to close. – When they reopened, they only gave savers ten cents for every dollar.

• There was no Federal Deposit Insurance Corporation to insure people's savings.

1. Effects of Black Tuesday on the Overall Economy

• Investors abandoned the stock market and started putting their money in commodities. – Gold prices soared. At that time, the U.S. was on the gold standard,

and promised to honor each dollar with its value in gold. – However, as people began turning in dollars for gold, the U.S.

government began to worry it would run out of gold.• The Federal Reserve thought it would come to the rescue by

increasing the value of the dollar. – How did it do this? By raising interest rates, which reduced liquidity

to businesses. – Without funds to grow, businesses started laying off employees,

leading to a vicious downward economic spiral that became the Great Depression.

2. Bank Failures

• Throughout the 1930s over 9,000 banks failed. – Bank deposits were uninsured and thus as banks failed people

simply lost their savings. • Surviving banks, unsure of the economic situation and

concerned for their own survival, stopped being as willing to create new loans. – This exacerbated the situation leading to less and less

expenditures. • As people had less money, whether from their bank

closing (and savings gone) or from their inability to get loans, they could spend less.

3. Reduction in Purchasing Across the Board

• With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items.

• This then led to a reduction in the number of items produced and thus a reduction in the workforce.

• As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed.– More and more inventory began to accumulate.

• The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation.

4. American Economic Policy with Europe

• As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies from companies abroad.

• This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation.

• If an American company relied upon foreign trade, they were in trouble.

5. Drought Conditions

• While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves.

• The area was nicknamed "The Dust Bowl."

President Hoover

Herbert Hoover • President 1929-1933• Hoover’s approach to the depression – Key to recovery was confidence – Blamed it on world-wide economic problems – Called for voluntary action by businesses – Unwilling to compromise political ideas – Rugged Individualism – Laissez-faire economics

• Public began to blame Hoover for the deepening depression – 1930 mid-term election house majority went to Democrats and

Senate control was only maintained by republicans by one seat.

Hoover’s Actions

• After the mid-term election Hoover began to take a more active approach – Created jobs through public works projects

• Building –buildings, roads, parks, and dams • 1930- building of Boulder Dam (Hoover Dam)

– http://www.history.com/shows/america-the-story-of-us/videos/the-hoover-dam

– Trickle Down Economic policies • Hawley-Smoot Tariff (1930)

• The Bonus Army (1932)– http://

www.pbs.org/wgbh/amex/macarthur/peopleevents/pandeAMEX89.html

The Bonus Army (1932)

President Hoover• President Hoover believed that too much intervention on the part of the

federal government during the Depression would destroy American individuality and self-reliance, and that public-private cooperation was the way to achieve high long-term growth.

• Hoover tried to combat the ensuing Great Depression with moderate government public works projects such as the Hoover Dam.

• Unfortunately, the record tariffs imbedded in the Smoot-Hawley Tariff and aggressive increases in the top tax bracket from 25% to 63%, coupled with increases in corporate taxes yielded a "balanced budget" in 1933, but seriously hindered economic recovery.

• Instead, the economy plummeted and unemployment rates rose to afflict one in four American workers. This downward spiral set the stage for Hoover's defeat in 1932 by Democrat Franklin D. Roosevelt, who promised a New Deal.

The Dust Bowl

20

Sample Slide with Image

1) Describe what you see in this picture.2) When and where do you think this picture was taken?

The Dust Bowl

• The Dust Bowl refers to parts of the Great Plains that experienced the most intense soil erosion and dust storms of the 1930s.

• This region included parts of Oklahoma, Texas, Kansas, Colorado, and smaller parts of New Mexico and Nebraska.

The Dust Bowl

• There were more than 300 dust storms, also known as “Black Blizzards,” between 1933 and 1938.

• These storms often featured fast moving clouds of dust several miles wide that covered farms and homes, destroyed crops, and made people sick.

The Dust Bowl

Migrant family in San Francisco, 1935

Farmer leveling dust hills in Texas, 1938

• Many people left the region hit by the Dust Bowl. They abandoned their homes and looked for work in Western states, such as California.

• However, many stayed behind and attempted to maintain their lives and farms.

The Dust Bowl Summary • 1931-1940• What was it?– Prolonged drought and dust storms “black blizzards”

• Causes – Drought – Removal of prairie grass – Over use of soil – Soil erosion – Drought – Winds

• http://www.history.com/shows/america-the-story-of-us/videos/america-black-blizzard

Life During the Depression

Social Effects • What people faced

– Evictions and homelessness • Hoovervilles

– Hunger – Little to no government help

• Why didn’t Hoover want to give direct relief?

• People’s Health – Psychological

• Depression • Suicide • Low self-image (men) • Humor- you laugh or you cry • Lasting psychological effects

– Physical • Starvation• Sleepy • Malnutrition

– Dropped out of school » Disease (tuberculosis) tripped in high schools many had to close

• Family life– Moved in with family in crowded apartments or

small homes – Men• Suffered from low self-image when they could not

provide for family • Many abandoned their families

– Women • Married women were fired • Could only find “women’s work”• Left to care for family when men abandoned them

• Making ends meet – Cities • many former businessmen sold apples or pencils on the

street to make money. • Begged for food • Fought over trash • Breadlines and soup kitchens

– Country • Grew food

• Competition for jobs – Asians deported – African-Americans • 56% unemployed • Lynching went up

• Vagrants – Hoboes – Young people ride the rails

The Empire State Building a Symbol of Hope

• Opened May 1, 1931• Developed by John J. Raskob • Cost $41 million • Construction gave 2,500- 4,000 people a job each day • World’s tallest building – 1,250 feet – 102 stories – 67 elevators that went 1,000 feet per minute

• First Sunday it was open 4,000 people paid $1 to go to the top

Election of 1932

Election of 1932

FDR• Democrat • Personal background• Optimistic/positive • “can do attitude”• Government helps people • Promised America a new

deal • 89% electoral votes • 57% popular vote

Hoover• Cold/heartless • Rugged Individualism • Reserved cautious• 11% electoral • 40% popular

FDR Takes Office

• The 20th amendment- moved inauguration to January to prevent lame duck president

• The First couple sets out to rebuild the public’s hope and confidence in the president – 2nd Bonus Army – Fireside chats

• The 21st amendment- repealed the 18th amendment

The New Deal/New Deal Programs

The New Deal

• The three R’s of the New Deal – Relief, Recovery, Reform

• The first 100 days– Pushed through program after program

• Alphabet soup • https://www.youtube.com/watch?v=WvcWeNf9

g6A

• http://www.history.com/topics/new-deal/videos/the-new-deal

Restoring Confidence in Banks

• Bank Holiday- March 5, 1933 – Closed banks for 4 days

• Emergency Banking Act – March 9, 1933 – Government could inspect financial health of the

banks – 2/3 reopened by March 15th

• Glass-Steagall Banking Act (1933) – Established Federal Deposit Insurance (FDIC)

Stock Market

• Federal Securities Act – May 1933– Required companies to give information about

their finances if they sell stocks.• Securities and Exchange Commission (SEC)-

1934– Regulated the stock market – Federal Reserve Board • Can regulate the buying of stocks on the margin

Money

• Removed money from the gold standard • Fiat Money- money backed only by the

governments promise that it is good• Wanted to devalue the dollar – Stimulate exports – Raise prices of crops and other products

Jobs

• Federal Emergency Relief Administration (FERA) –May 1933

• Civil Works Administration (CWA)- November 1933

• Civilian Conservation Corps (CCC)- March 1933

Economy

• National Industrial Recovery Act- (NIRA)- June 1933– National Recovery Administration (NRA)

• Public Works Administration (PWA)

Homeowners and Farmers

• Homeowners – Homeowners’ Loan Corporation (HOLC) – Federal Housing Administration (FHA) • National Housing Act- 1934

• Farmers – Agricultural Adjustment Administration- (AAA)-

May 1933 – Tennessee Valley Authority (TVA)- May 1933

FDR’s Advisors

• The “Brain Trust” • Appointments – Women• Frances Perkins

– African-Americans• Mary McLeod Bethune • The “Black Cabinet”

• Eleanor Roosevelt

Issues with the New Deal

The New Deal Stumbles

• Failed to bring significant economic change• Gave increased power to the federal

government• Supreme Court Rulings – 1935 NIRA – Taxes and the AAA

The Second New Deal • Works Progress Administration (WPA)-1935– WPA and the arts

• Federal Writers’ Project • Federal Music Project • Federal Art Project • Federal Theater Project

• Trouble with the AAA– Resettlement administration- 1935

• Farm security Administration

• Rural Electrification Administration (REA)• Wagner Act-1935– National Labor Relations Board (NLRB)

• Social Security Act-1935