The Ripple Effect

At first, crash only affected those heavily invested in stock market

It did not take long for a ripple effect to occur

How the Crash Spread

Risky loans hurt banksBank loans to high-risk businessesBusinesses unable to pay loans when

stocks fell

Consumer borrowingConsumers heavily borrowed to purchase

goodsConsumers unable to pay when banks

called in loans

How the Crash Spread (cont.) Bank runs

People feared banks would run out of money

Result ran to banks to withdraw Banks had to recall loans from borrowersBanks could not get money fast enough

Bank failuresUnpaid loans + bank runs = bank failuresThousands of banks closed

How the Crash Spread (cont.) Savings wiped out

Bank failures wiped out people’s savingsBy 1933, money from over 9 million

accounts had disappeared

Cuts in productionBusinesses could no longer borrow $$ to

produce goodsPeople had no $$ to buy goods anyway

How the Crash Spread (cont.) Rise in unemployment

Because businesses had to cut production, they laid off workers

By 1932, over 12 million unemployed Further cuts in production

Unemployment +Shrinking economy = Less output of goods

Impact on World

International banking, manufacturing and trade made the world internationally dependent upon the US

US demanded France & Britain pay wartime debts while keeping taxes on imports high

Created a situation in which the Allies had to rely on Germany’s reparations

Underlying Causes of the Great Depression Stock market crash did not cause the GD

Main Causes:Unstable EconomyOverspeculationGovernment Policies

Unstable Economy

Uneven distribution of wealth

Increase in supply, decrease in demand

Farmers & workers did not profit from boom

This all added to make it increasingly difficult for the economy to quickly recover

Overspeculation

Too much stock bought on margin

Therefore, the stock market boom was based on borrowed money not real value

Government Policies

Federal Reserve cut interest rates to stimulate economy

1929 – worried about overspeculation limited US money supply (discourage lending)

Result = not enough $$ to help economy recover from crash

Poverty Spreads

GD had serious social effects

Not long until it hit all levels of society

Laid off (even white collar)

Savings disappeared (literally)

“Hoovervilles”

Hardest hit = lower class

Many became homeless

Homeless built shanty towns out of cardboard or scrap materials

Why “Hoovervilles?”

Hooverville Children

Many blamed President Hoover for not helping

Hooverville

A woman describes a Hooverville in Oklahoma:

“Here were all these people living in old, rusted-out car bodies,” she noted. “There were people living in shacks made of orange crates. One family with a whole lot of kids were living in a piano box.”

Drifters & Hobos

Many homeless, jobless people became drifters or hobos

Hitchhiked throughout US Many hitched rides and slept in open

boxcars or freight cars

Farm Distress

Low crop prices = low income for farmers

Many could not pay mortgage lost farms

Things got worse in Midwest as the nation was hit with a terrible drought

The Dust Bowl

Name given to the central and southern Great Plains in the 1930s when the region sustained a period of drought and dust storms.

“Black Blizzard”

Surviving the Great Depression

Americans pulled together

Support for one another & protests led to much needed change

Change in America

1933 – 21st Amendment Prohibition is repealedSeen as a failed social

experiment

Changes in America (cont.) Empire State Building

102 stories – 1,250 ft. tall

Employed thousandsCosts $41 million (half

of est. costs)Bragging rights for US

End of an Era (1920s) Al Capone

Arrested

Calvin CoolidgeDied

Charles LindberghSon kidnapped &

murdered

Babe RuthRetired

The Election of 1932

Herbert Hoover (R)“Brother Can You Spare a Dime?”

Franklin Delano Roosevelt (D) “Happy Days Are Here Again!”

Who would you vote for????

Hoover vs. FDR

Hoover’s Policies Agricultural policies

ultimately failed Mid-term elections –

Dems gained control of Congress

Tried to create jobs by spending more on:BuildingsRoadsParksDams (incl. Hoover Dam)

Hawley-Smoot Tariff (1930) Highest import tax in history Attempt to protect domestic industries

from foreign imports Backfired b/c Europe raised their tariffs,

thus leading to slowdown in international trade

RFC (1932)

Reconstruction Financing Corporation Gave gov’t credit to many industries,

railroads and insurance companies Lent money to banks Hope = money at top would work its way

down and help economy as a whole How did people at the bottom view it?

RFC (cont.)

People saw the RFC as the gov’t helping banks & big business while ordinary people were starving.

As a result, Hoover’s popularity took a nose dive

The Roosevelts

Franklin Delano Roosevelt (D) & Eleanor Roosevelt

Distant cousins (yes, I know that’s nasty)

6 children

Eleanor Roosevelt

Niece of Teddy “Ugly Duckling” Educated in England

& France Intelligent, warm –

well liked very involved in

several causes/ reform movements

The Election of 1932

Despite a wealthy upbringing, Roosevelt had extreme compassion for those less fortunate

Why do you think this appealed to America?

1932 Election (cont.)

Symbol of optimism and hope

FDR won by landslide Served most consecutive

terms as president (4) until his death in 1945

1933 Inaugural Address

“The only thing we have to fear, is fear itself…”

The First 100 Days

Immediate relief = goal March 9 - June 16, 1933 a record

number of bills sent, all of which passed easily

Emergency Banking BillMarch 12 - FDR announced soundest banks

would reopen. March 13 - deposits at those banks

exceeded withdrawals

First 100 Days (cont.)

"Capitalism was saved in eight days," said Raymond Moley

This was critical b/c it demonstrated to Congress that the New Deal was the real deal

First 100 Days (cont.)

Other bills included the creation of the: Federal Emergency Relief Administration Civilian Conservation CorpsReconstruction Finance CorporationTennessee Valley Authority

First 100 Days (cont.)

Congress also:gave the Federal Trade Commission broad

new regulatory powersprovided mortgage relief to millions of

farmers and homeowners.