The Great DepressionThe Great Depression

The_Great_Depression_Begins

Election of 1928Election of 1928

Prohibition and poverty major Prohibition and poverty major campaign issuescampaign issues

Republicans take credit for Republicans take credit for prosperity of ’20sprosperity of ’20s

Herbert Hoover, Republican, Herbert Hoover, Republican, elected by landslideelected by landslide– Promise to keep ProhibitionPromise to keep Prohibition– Prosperity of ’20sProsperity of ’20s

Black_Tuesday

The Stock MarketThe Stock Market

StockStock– Ownership in companyOwnership in company– Sold to raise capitalSold to raise capital

Improvements, expansionImprovements, expansion

Stock marketStock market– Where stock is bought and soldWhere stock is bought and sold

Bull marketBull market– Period of rising stock valuePeriod of rising stock value– Caused millions to invest heavilyCaused millions to invest heavily

Buying on marginBuying on margin– Small down paymentSmall down payment– Pay off balance ‘loan’ when stock soldPay off balance ‘loan’ when stock sold– Safe as long as stock price risesSafe as long as stock price rises

Margin callMargin call– Calling in ‘loan’ for repaymentCalling in ‘loan’ for repayment

SpeculationSpeculation– Buying stock at low priceBuying stock at low price– Hold for short timeHold for short time– Sell for quick profitSell for quick profit

Problems with Stock MarketProblems with Stock Market

No government regulationNo government regulation

Stock bought not reflect true valueStock bought not reflect true value– Prices bid up without looking at Prices bid up without looking at

company’s earnings and profitscompany’s earnings and profits

The CrashThe Crash

Margin callsMargin calls– Led to stock salesLed to stock sales

Flooded marketFlooded market– Caused prices to dropCaused prices to drop– Panic on Oct 24, 1929Panic on Oct 24, 1929– More & more stock put up for saleMore & more stock put up for sale– Stock priced bottomed outStock priced bottomed out

Tuesday, Oct. 29, 1929Tuesday, Oct. 29, 1929– ““Black Tuesday”Black Tuesday”– Stock market crashedStock market crashed– Beginning of Great DepressionBeginning of Great Depression

Collapse of Banking IndustryCollapse of Banking Industry

Banks had invested in stock marketBanks had invested in stock market Risky loansRisky loans

– Could not collect moneyCould not collect money People pulled money outPeople pulled money out

– ‘‘bank runs’bank runs’ Unstable banks closedUnstable banks closed

Causes of Causes of Great DepressionGreat Depression

Efficient machinery

Overproduction

Decline in Sales

Unemployment

Gov’t economic policies

High Import Tariffs

High Export Tariffs-no foreign markets

Overproduction-

Surplus goods-

Unemployment

Unchecked Stock Speculation

Increase in stock price

Decrease in stock demand

Stock Market Crash

Oct. 29, 1929

“Black Tuesday”

Unregulated Banking Industry

Risky loans-

Overextended credit

Inability to recover money

Collapse of Banks

Other Factors to ConsiderOther Factors to Consider

Decline of farming industryDecline of farming industry Uneven distribution of wealthUneven distribution of wealth International economic policiesInternational economic policies Easy credit purchasingEasy credit purchasing Weak and unregulated banksWeak and unregulated banks

Welcome_to_Hooverville

Farmers and DustFarmers and Dust

Decline of the farmerDecline of the farmer– OverproductionOverproduction

Drop in farm pricesDrop in farm prices Economic devastationEconomic devastation

– Loss of farmsLoss of farms

– Overuse of landOveruse of land Fields left bare, exposed to elementsFields left bare, exposed to elements 1932 drought1932 drought Winds caused blowing sand Winds caused blowing sand

Farming poverty contributed to nation’s Farming poverty contributed to nation’s overall economic declineoverall economic decline

Hoover’s Relief EffortsHoover’s Relief Efforts

Public worksPublic works– Gov’t financed building projectsGov’t financed building projects

Provided jobs lost in private sectorProvided jobs lost in private sectorTo pay for projects—raise taxes or borrow from To pay for projects—raise taxes or borrow from

banksbanks

Reconstruction Finance CommitteeReconstruction Finance Committee– Provide funding for banks, railroads, and Provide funding for banks, railroads, and

agricultural institutionsagricultural institutionsToo cautious with loans to be effectiveToo cautious with loans to be effective

Veteran’s march for bonusVeteran’s march for bonus– Promised $1,000 to be paid in 1945Promised $1,000 to be paid in 1945– 1931 legislation, borrow ½ of bonus1931 legislation, borrow ½ of bonus– 1932 marched on Washington D.C. for full 1932 marched on Washington D.C. for full

amountamountCongress voted down pmt of bonusCongress voted down pmt of bonus

Hoover did more to expand role of Hoover did more to expand role of federal gov’t than any previous federal gov’t than any previous presidentpresident

Hoover Cont’d……Hoover Cont’d……

A Time for ChangeA Time for Change

Election of 1932Election of 1932– Hoover, RepublicanHoover, Republican– Franklin D. Roosevelt, DemocratFranklin D. Roosevelt, Democrat

Republicans blamed for economic Republicans blamed for economic hardshipshardships

FDR and his “New Deal” winsFDR and his “New Deal” wins

Roosevelt_Elected

• 32nd President

• New Deal

• Fireside Chats

• “The only thing we have to fear is fear itself”

• Talent for giving hope and confidence to Americans

Franklin Delano Roosevelt

Roosevelts_Programs

FDR’s Immediate ActionsFDR’s Immediate Actions

Restore confidence in banksRestore confidence in banks– Called national bank holidayCalled national bank holiday– Congress passed Emergency Banking Relief Congress passed Emergency Banking Relief

ActActFederal examiners survey banksFederal examiners survey banks

– Issue licenses to the financially soundIssue licenses to the financially sound

Fireside chat to inform public banks were Fireside chat to inform public banks were securesecure– Following day—deposits outweighed Following day—deposits outweighed

withdrawalswithdrawals

Federal Deposit Insurance Federal Deposit Insurance Corporation (FDIC) – provide gov’t Corporation (FDIC) – provide gov’t insurance for bank deposits up to insurance for bank deposits up to certain amountcertain amount

Securities and Exchange Commission Securities and Exchange Commission (SEC)– regulate stock market and (SEC)– regulate stock market and prevent fraudprevent fraud

The New Deal

• Produced amazing amount of legislation first 100 days in office

• Based on:• Relief – immediate relief for needy• Recovery – recovery for nation at large• Reform - long-range reform for economic institutions

Civilian Conservation CorpsCivilian Conservation Corps

Unemployed men Unemployed men 18-25 yrs old18-25 yrs old

Work in nat’l parksWork in nat’l parks Planted trees, Planted trees,

fighting forest fires, fighting forest fires, built trailsbuilt trails

Rec’d $30/mo plus Rec’d $30/mo plus food, shelter, food, shelter, clothing, education clothing, education opportunitiesopportunities

Civil Works AdministrationCivil Works Administration

Established 1933, abolished 1934Established 1933, abolished 1934

Men worked on federal, state, local projectsMen worked on federal, state, local projects

Built roads, schools, airports, parksBuilt roads, schools, airports, parks

Funded by Federal Emergency Relief Admin.Funded by Federal Emergency Relief Admin.

• Created to expand fight against unemployment

• Based on idea of work relief

• Gave unemployed jobs rather than money - construction & improvement - bridges, roads, bldgs

• Established programs to help writers, actors, and artists— Federal Number One

Works Progress Administration

Public Works AdministrationPublic Works Administration Boost economy & stimulate industrial recoveryBoost economy & stimulate industrial recovery

Worked with private companies & military bldg Worked with private companies & military bldg schools, hospitals, courthouse, navy cruisersschools, hospitals, courthouse, navy cruisers

Permitted contractors to hire 650,000 workersPermitted contractors to hire 650,000 workers

Absorbed 1943 by Federal Works AgencyAbsorbed 1943 by Federal Works Agency

Agricultural Adjustment AdministrationAgricultural Adjustment Administration

Relief for farmersRelief for farmers

Paid to limit crop and livestock productionPaid to limit crop and livestock production

Created limited supplyCreated limited supply– Caused prices to increaseCaused prices to increase

Helped some; caused hardship for tenant Helped some; caused hardship for tenant farmersfarmers

Tennessee Valley AuthorityTennessee Valley Authority Most celebrated Most celebrated

accomplishment of New Dealaccomplishment of New Deal

Redeveloped 40,000 square Redeveloped 40,000 square miles covering seven states miles covering seven states along Tennessee Riveralong Tennessee River

Provided flood control, Provided flood control, cheap electricity, new cheap electricity, new factories, jobsfactories, jobs

Constructed dams and Constructed dams and electrical power projectselectrical power projects

• Most important legislation in American history

• Monthly pensions to qualified retirees over 65

• Benefits began 1942

• Funded by special tax

• Established system of unemployment insurance

• Assistance programs for other “dependent” people

Social Security Administration

The_Second_New_Deal

The End of An EraThe End of An Era Democratic Party members shifted from mainly Democratic Party members shifted from mainly

white Southerners to include African Americans, white Southerners to include African Americans, farmers, laborers, new immigrants, & womenfarmers, laborers, new immigrants, & women

Roosevelt 2Roosevelt 2ndnd term has limited successes term has limited successes– Congress begins to block New Deal legislationCongress begins to block New Deal legislation– Caused economic downturn by cutting gov’t Caused economic downturn by cutting gov’t

spendingspending– Era ended 1939Era ended 1939– Gave Americans stronger sense of security Gave Americans stronger sense of security

and stabilityand stability– Cut gov’t spending which caused economic Cut gov’t spending which caused economic

downturndownturn

The EndThe End