The Great Depression1929-1941

The Great Depression was the worst economic crisis in the history of America

Several flawed economic and political policies contributed to the stock market crash

The Depression affected Americans of all classesThe New Deal demanded significant spending on

the federal level to combat the DepressionThe New Deal sought to solve the problems of the

Depression by providing public work projectsThe New Deal changed the role of government in

American lifeThe impact of the New Deal affects American life

today

Big Picture

What underlying issues and conditions led to the Great Depression?

Why were the policies of the Hoover Administration ineffective in dealing with the problems of the Depression?

How did the Great Depression impact American society and the American dream?

How did President Franklin D. Roosevelt change the role of the presidency in American History?

How successful was the New Deal in solving the problems of the Great Depression and restoring American prosperity?

Essential Questions

The Stock Market Crash marks the beginning of the Great Depression, but the underlying causes began in the 20’s and earlier.

Depression Causes

1.Massive uneven

distribution of income

4.Overextension of Credit

2.Stock Speculation-

“Get rich quick

scheme”

3.Agriculture Problems

5.Surplus of goods

October 29, 1929-Black Tuesday marks the start of the Great Depression

Stock Market Crash-Oct. 29, 1929

Panic selling-causes prices to drop

By the last week in Oct. the bottom fell out of the stock market.

Black Tuesday-16 million shares

sold, nearly worthless

30 billion lost in all

The Beginning of the End

Why did the crash occur?

Speculation- was a way of gambling with short-term investments.(buying on the margin)

Speculators would buy stocks they thought would quickly rise in price. After the price of their stocks went up, they would sell the stock for a profit.

A person who bought stock in Hershey Chocolate in August 1928, for example sold it in September 1929 , and made a 100% profit.

Banks commonly paid an interest rate of 5-7%, making profit from stock much more attractive.

Stock Market Speculation

Buying on MarginPeople would buy on

margin“pay only a fraction of

a stock’s $ value” Borrowing the rest of

the money from a stockbroker,

Paying the broker back (plus commission) when the stock went up and the investor sold it.

Normal

$500 / $100 (per share)=5 shares of stock

$500 = down payment (5%) = $10,000 / $100 (per share) = 100 Shares of stock

Buying on MarginBuying on Margin

Start = $500 Shares cost $100/Share

Normal

5 Shares x $200 = $1,000

100 Shares x $200 = $20,000

$20,000 -$9,500 = $10,500

$10,500 – $2,100 (20% Commission) = $8,400

Buying on MarginBuying on Margin

Using above amounts = Stock value increases to $200 per share

Buying Normal

5 shares x $0 = $0 Loss of $500

100 shares x $0 = $0 Loss of $10,000BIG PROBLEM= Still

owe $9,500

Buying on MarginBuying on Margin

Using the above amounts: Stocks worth $0

During the Roaring 20’s margin buyers made fortunes.

As long as stock prices kept going up, brokers were happy to lend money to speculators.

As soon as prices began to decline, brokers asked investors to put more money down. (Margin Call)

When the investor did not have more money to put down, the broker sold the stock and kept the proceeds as repayment for the loan.

Buying on Margin

The Beginning of the EndBy summer of 1929,

brokers had lent out more than $6 billion in margin loans to their customers.

Saturated the market.Brokers started calling for

there margins.Investors did not have

cash to pay for the margin.

Brokers were forces to sell the stocks.

Panic

Banks lent their cash reserves to stockbrokers.

The brokers lost the money when their customers failed to repay the loan.

Saving deposits were not federally insured

Bank Runs- massive withdrawals, money not insured, bank closes-no money

Thus resulting in millions of innocent people losing their savings in the financial crunch.

By 1933, over 20% of banks had closed over, 10,000 across the U.S. since 1929

Next were the Banks-Bank Runs and Bank Failure

KeynesianFall in Demand was

the causeFederal government

must spend to stimulate

Fed should print more money, lower interest rates, cut taxes

Fed caused the Depression

Raised interest ratesDidn’t help banksDiscouraged unsafe

loansReturn to the gold

standard

What Caused the Great Depression? Reading

Monetarist

Tax increases in 1932Fed Policy

Easy money of the 20’s- low interest ratesIn 1928, the Fed raises interest rates and cut

the money supplyTariffs

1931, Congress passed high tariffsCloses foreign trade

Other Causes

In Cities Mass unemployment Wage cuts Evictions Bread lines-soup kitchens Hoovervilles

Falling prices Foreclosures Dust Bowl-worst

environmental disaster Sharecroppers/Migrant

workers Migration

Okies, west for jobs

Life in the Depression- Unemployment peaks at 25% in 1933, 25% are part time

On Farms

The Great Depression shatters many people’s life. The most popular song of the era sums up the disillusionment felt by many.Crime and kidnappings increase, birth rates drop, families are separated, malnutrition grows, # of orphans grows, # of homeless grows.

Life in the Depression

Hoover doesn’t cause the Depression, but he is blamed.

Hoover opposes direct federal aidEncourages

VolunteerismMaintain jobs,

wages, pricesWealthy to give to

charityLocal and state

governments to provide jobs and relief

By 1932, Hoover begins a new plan-more direct Federal aid

Government will loan money to banks and big businesses , farm cooperatives, creates public works

Farm Board Revenue Act

Increase taxes on wealthy Raises estate, corporate taxes

RFC- aid to states Emergency Relief Act-July 32-

$300 million in unemployment benefits

Hoover’s Response

Volunteerism Fails

Bonus Army(summer 1932)WWI veterans camped

out in D.C. demanding their bonus pay($1,000 by 45)

17,000+veterans march on D.C., camp in tents

Congress did not pass the bill to give them their bonus early.

Army Chief of Staff Douglas MacArthur ignores orders and violently removes the ‘Army’

Election of 1932Hoover Franklin D. Roosevelt

Franklin D. Roosevelt won by a landslide. Hoover withall of his optimism and organizational skill, was defeated by theDepression and its crushing economic problems.

The Dust BowlWhat: Worst

environmental disaster in American History

When: 1931-1939Where:

The Dust Bowl AssignmentUse the textbook

pages 438-439, and the handout.

Identify the following about the Dust Bowl

Causes:Effect/Results:Responses:

The Dust BowlCauses Effects/Results Responses

-Over farming-Drought-Removal of Grasslands-High Winds

-Dust Pneumonia-Migration-Loss of topsoil, crops, livestock-Plagues-Static electricity

-Soil Conservation Service-Forest Service-shelter belts-People attempt many things to bring rain

What do you know about Mr. Roosevelt?Form a small group

and list everything you know or have heard about FDR and the New Deal

Hoover vs. Roosevelt

New Deal Cartoon

Franklin D. Roosevelt 1933-1945 Governor of New York Polio in 1921 Democrat Easily defeated Hoover in

1932 First President to embrace

radio New Deal Broad Executive Power Increased Power of Federal

Government Longest President Love-Hate Relationship

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

“A New Deal for the American people.”Relief- for the unemployedRecovery- to stimulate the economyReform- laws to help lessen the threat of

another economic disasterThe Hundred Days- Enacted 15 major

bills(March 9-June 16 1933)

The New Deals 3 R’s

The New Deal

Reform

Recovery

Relief

New Deal Reading Assignment

FDR declares a temporary bank shut down FDR assured the people their money would

be safe in the bank- only reopens banks in sound financial shape

Creates FDICFireside Chats- Radio address to people about

the issues and promote the “New Deal” legislation.Restored their confidence

Advisors with varied view points“Brain Trust” 1st female cabinet member, Frances Perkins.

Banking Crisis

Truth-in-Securities Act:designed to eliminate fraud in the stock

market. Honest info. to investors The Glass-Steagall Banking Act:

prohibited banks from investing savings deposits in the stock market, which was too unpredictable to assure the safety of these funds.

SEC is created to regulate the stock market and prevent fraud.

Reform Laws

Indian Reorganization Act of 1934- prevented government from selling unclaimed reservations land and selling it to people who were not Native American. Native Americans could determined how their

lands would be used and managed. Encouraged Native Americans to establish

their own government’s on reservations.

Native Americans Gain an Ally

For the unemployedFederal Emergency Relief Administration

(FERA): Would distribute $ to state and local relief

agencies.With days of the bill being passed $5 million

dollars was handed out.Dole- Government Charity, opposed want work

programsCivilian Conservations Corps (CCC):

Put thousands of unemployed men and women to work each season on environmental projects.

County, State and National parks, local projects, restoring forests

Emergency Relief

Home Owners’ Loan Corporation (HOLC)- Loans to people behind on mortgage payments

10% of home owners use

Farm Credit Administration (FCA)- Loans to farmers to keep farms and land

Relief

Relief Cont.Public Works

Administration (PWA):Helped provide jobs

for the unemployed. 4 million

$3.3 billion to carry out public projects.

Schools, dams, refurbishing government buildings, planning sewage systems, improving highways

Stimulate the economyGoals was to increase the productivity of the

economyNational Industrial Recovery Act (NIRA):

To help factories recovery fasterCalled for business leaders to confer and

establish codes to set quality standards, production levels, prices, maximum work hours, minimum wages.

Also declared that workers should be allowed to organize labor unions and bargain collectively. ---->

Shorten work hours, which forced business to hire more people.

Declared unconstitutional

National Recovery Administration

RecoveryEstablished to help farmers that were hit

hard by the Great DepressionPaid farmers Subsidy, or financial assistance,

to reduce the production of crops and the number of animals they raised.

This would bring supply of agricultural products more in line with the demand for them, causing prices to rise.

Declared unconstitutional

Agricultural Adjustment Administration (AAA)

RecoveryBuilt dams in the Tennessee River to turn the

river’s water power into electricity.Would also enrich the land, create fish-filled

lakes that would in turn increase tourism, and provide jobs.

Huge success

Tennessee Valley Authority (TVA)

$4.8 billion Relief ProgramBuilding projects including hospitals, schools,

airports and playgrounds.Put unemployed teachers, painters, and

writers back to workImproved the quality of life in communities

across the nations8 million jobs

2nd New Deal- Works Progress Administration

When the Supreme Court declared the NIRA was unconstitutional, workers lost the right to join a union and collectively bargain.

Wagner act- restored those rights. It also set up the National Labor Relations Board, which was created to ensure that employer followed the new law.

Soil Conservation Act- required farmers to reduce the acreage of the same crops the AAA had previously paid them not to plant, new farming techniques(Dust Bowl)

2nd New Deal- Aiding Recovery

Fair Labor and Standards Act: outlawed child labor, established a federal minimum wage, 40 hour work week, overtime pay

Social Security Act: Old age pension system, survivors, unemployment insurance, aid for dependent mothers and children, disabled

2nd New Deal- Reforms

Expanded the Role of Government Federal Regulation Under the New Deal for the first time the

federal government assumed responsibility for the economic welfare of individuals as well as for the health of the national economy at large.

Deficit SpendingStock Market monitoredFDR’s New Deal proved to be the turning

point in the country’s history.

Legacy of New Deal