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4/13 & 4/14ICEBREAKER ~ TAKE OUT YOUR NOTES OPEN
NOTEBOOK QUIZ ON THE CIVIL WAR
AREA OF STUDY #7 ~ THE GREAT DEPRESSION AND THE
AMERICAS 1929 – 1939
• THIS WILL COVER TOPIC / QUESTIONS #13 & #14 ON YOUR EXAM
• HOMEWORK ASSIGNMENT FOR THIS UNIT ~ ANSWER ONE OF THE FOLLOWING ESSAY QUESTIONS
13. DISCUSS HOOVER’S RESPONSE TO THE GREAT DEPRESSION.
14. ANALYZE THE IMPACT OF THE GREAT DEPRESSION ON ONE COUNTRY OF THE REGION
CAUSES OF THE GREAT DEPRESSION
THE GREAT DEPRESSIO
N IS ONE OF THE MOST
MISUNDERSTOOD
EVENTS IN AMERICAN HISTORY…
SOME POINT TO THE CRASH OF THE STOCK MARKET
AS THE CAUSE OF THE DEPRESSION…
NOT TRUE.
SOME BLAME HERBERT HOOVER,
CLAIMING HIS “HANDS-OFF”
ECONOMIC POLICIES DRAGGED
AMERICA INTO THE DEPRESSION…
NOT ACCURATE.
THE GREAT DEPRESSION WAS A WORLDWIDE
EVENT.
BY 1929, THE WORLD SUFFERED A MAJOR
RISE IN UNEMPLOYMENT.
IN THE FIRST FOUR YEARS OF THE DEPRESSION,
REAL ECONOMIC OUTPUT (GROSS DOMESTIC
PRODUCT) FELL BY 30%
FROM 1929 TO 1933.
THE U.S. STOCK MARKET LOST 90% OF ITS VALUE.
THERE ARE SEVERAL EXPLANATIONS, BUT THE MOST OBVIOUS CAUSES ARE FOUR:
1. OVERPRODUCTION2. BANKING & MONEY POLICIES 3. STOCK MARKET ACTIONS 4. POLITICAL DECISIONS
1. OVER-PRODUCTION:
THE “ROARING TWENTIES” WAS AN ERA
WHEN OUR COUNTRY PROSPERED
TREMENDOUSLY.
AVERAGE OUTPUT PER WORKER INCREASED 32% IN MANUFACTURING AND
CORPORATE PROFITS ROSE 62%.
BUT IN REALITY THERE EXISTED:* UNDERCONSUMPTION OF THESE GOODS HERE AND ABROAD, BECAUSE PEOPLE DIDN’T HAVE ENOUGH CASH TO BUY ALL THEY WANTED…* THERE STILL EXISTED AN UNEVEN DISTRIBUTION OF WEALTH AND INCOME.
AMERICAS’ FARMS WERE OVERPRODUCING, AS WELL.DURING WORLD WAR I, WITH EUROPEAN FARMS IN RUIN, THE AMERICAN FARM WAS A PROSPEROUS BUSINESS.
INCREASED FOOD
PRODUCTION DURING WORLD WAR I WAS AN
ECONOMIC “BOOM” FOR
MANY FARMERS, WHO BORROWED
MONEY TO ENLARGE AND MODERNIZE
THEIR FARMS.
SO, TO SUMMARIZE IT, HIGH DEMAND FOR CONSUMER
GOODS AND
AGRICULTURAL PRODUCTS LED TO OVERPRODUCTION
.
2. BANKING & MONEY POLICIES
THE UNEVEN DISTRIBUTION
OF WEALTH DIDN’T STOP
THE POOR AND
MIDDLE CLASS FROM
WANTINGTO POSSESS
LUXURY ITEMS, SUCH AS CARS AND RADIOS…
ALTHOUGH WAGES WERE NOT KEEPING UP WITH THE PRICES OF
THOSE GOODS…”BUYING ON CREDIT”
OFFER A SOLUTIONS!
BY THE END OF THE 1920S, 60% OF THE
CARS AND 80% OF THE RADIOS WERE BOUGHT
ON INSTALLMENT CREDIT.
THE FEDERAL RESERVE BOARD
WAS CREATED BY CONGRESS
IN RESPONSE TO THE BANKING CRISIS OF
1907.
THE FEDERAL RESERVE WAS SUPPOSE TO SERVE
AS A PROTECTIVE
“WATCHDOG” OF THE NATION’S
ECONOMY.
IT HAD THE POWER TO SET THE INTEREST RATE
FOR LOANS ISSUED BY BANKS.
SO,TO SUMMARIZE, BANKING POLICIES WHICH OFFERED “BUYING ON CREDIT” FIRST WITH LOWER INTEREST RATES, THEN RAISING THOSE RATES, CAUSED A DANGEROUS SITUATION IN THE ECONOMY.
BUYING ON CREDIT
INCREASED PERSONAL DEBT.
HIGHER INTEREST RATES CAUSED LESS DEMAND FOR GOODS.
3. STOCK MARKET ACTIONS
THE STOCK MARKET WAS AN INDICATOR OF NATIONAL
PROSPERITY.
THE STOCK MARKET GROWTH
IN THE 1920S TELLS A STORY OF
RUNAWAY OPTIMISM
FOR THE FUTURE.
SMALL INVESTORS WERE MORE APT TO
INVEST INTHE STOCK MARKET IN LARGE NUMBERS
BECAUSE THE “MARGIN
REQUIREMENT” WAS ONLY 10%.
GEORGE OLSEN AND HIS MUSIC "I'M IN THE MARKET FOR YOU”
I'LL HAVE TO SEE MY BROKERFIND OUT WHAT HE CAN DO.
'CAUSE I'M IN THE MARKET FOR YOU.
WITH MARGIN I'M ALL THROUGH.
'CAUSE I WANT YOU OUTRIGHT IT'S TRUE.
WE'LL COUNT THE HUGS AND KISSES,
WHEN DIVIDENDS ARE DUE,'CAUSE I'M IN THE MARKET FOR
YOU.
AS BUSINESS WAS BOOMING IN THE
1920S AND STOCK PRICES
KEPT RISING WITH BUSINESSES’ GROWING PROFITS,
BUYING STOCKS ON MARGIN
FUNCTIONED LIKE BUYING A CAR ON
CREDIT.
The extensive speculation
that took place in the late 1920s
kept stock prices high, but the balloon
was due to burst…
THE CRASH:
“BLACK TUESDAY”
OCT. 29, 1929, THE STOCK MARKET CRASHED.
OVER 16 MILLION
SHARES SOLD IN MASSIVE
SELLING FRENZY.
LOSSES EXCEEDED
$26 BILLION.
THE STOCK MARKET CRASH OF 1929
WAS ONLY A SYMPTOM- NOT THE CAUSE OF THE
GREAT DEPRESSION.
BUYING ON MARGIN WAS A
RISKY MARKET PRACTICE.
BANK LOANS FOR STOCK PURCHASES
WAS AN UNSOUND PRACTICE.
MORE POOR BANKING POLICIES…
THE FEDERAL RESERVE WAS ALSO
ESTABLISHED TO PREVENT
BANK CLOSINGS.
IT WAS SUPPOSE TO SERVE AS THE “LAST RESORT” LOANER TO
BANKS ON THE VERGE OF COLLAPSING.
IN EARLY 1930, THERE WERE 60 BANK
FAILURES PER MONTH.
EVENTUALLY, 9,000 BANKS CLOSED THEIR DOORS BETWEEN 1930
AND 1933.
SIMPLY PUT, WHEN A BANK FAILS, A LARGE AMOUNT OF MONEY DISAPPEARS FROM THE ECONOMY.
THERE WAS NO INSURANCE FOR DEPOSITORS AT THIS TIME, SO MANY LOST THEIR SAVINGS.
AS BANKS CLOSED THEIR DOORS AND MORE PEOPLE LOST THEIR SAVINGS, FEAR GRIPPED DEPOSITORS ACROSS
THE NATION.
BUSINESS ALSO LOST ITS MONEY AND COULD NOT FINANCE ITS ACTIVITIES…
MORE BUSINESSES WENT BANKRUPT AND CLOSED THEIR DOORS, LEAVING MORE PEOPLE UNEMPLOYED…
…CAUSING UNEMPLOYMENT TO REACH EVEN HIGHER LEVELS.
4. POLITICAL DECISIONS:
THE DEPRESSION COULD HAVE BEEN LESS SEVERE HAD POLICY
MAKERS NOT MADE CERTAIN MISTAKES…
LEADERS IN GOVERNMENT AND BUSINESS RELIED ON POOR ADVICE
FROM ECONOMIC & POLITICAL EXPERTS...
“THE SOLE FUNCTION OF THE GOVERNMENT IS TO BRING ABOUT A CONDITION OF AFFAIRS FAVORABLE TO THE BENEFICIAL DEVELOPMENT OF PRIVATE ENTERPRISE.”
HERBERT HOOVER (1930)
BUT DID HOOVER REALLY BELIEVE IN A “HANDS-OFF”
FREE MARKET PHILOSOPHY?
HOOVER DID TAKE ACTION
TO INTERVENE IN THE
ECONOMY, BUT IT WAS TOO
LITTLE TOO LATE-
WITHIN A MONTH OF THE
CRASH, HOOVER MET
WITH KEY BUSINESS
LEADERS TO URGE THEM TO KEEP WAGES HIGH, EVEN
THOUGH PRICES AND
PROFITS WERE FALLING.
THE GREATEST MISTAKE OF THE HOOVER
ADMINISTRATION WAS PASSAGE OF THE SMOOT-
HAWLEY TARIFF, PASSED IN 1930.
OFFICIALS BELIEVED THAT RAISING TRADE BARRIERS WOULD FORCE
AMERICANS TO BUY MORE GOODS AT HOME, WHICH WOULD KEEP AMERICANS
EMPLOYED.
Smoot Hawley Tariff of 1930 and Trade Reform Act of 1934
0
1
2
3
4
5
6
7
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Billio
ns o
f Nom
inal
Dol
lars
Exports
Imports
IT VIRTUALLY CLOSED OUR BORDERS TO
FOREIGN GOODS AND IGNITED A VICIOUS
INTERNATIONAL TRADE WAR.
4/15 & 4/16
• ICEBREAKER ~
• WHAT WERE THE FOUR CAUSES TO THE GREAT DEPRESSION???
• ESSAY AND REVIEW DUE FRIDAY/MONDAY
• QUIZ FRIDAY/MONDAY
13. DISCUSS HOOVER’S RESPONSE TO THE GREAT DEPRESSION.
14. ANALYZE THE IMPACT OF THE GREAT DEPRESSION ON ONE COUNTRY OF THE REGION
CAUSES OF THE GREAT DEPRESSION
1. Overproduction2. Banking & Money Policies 3. Stock Market Actions 4. Political decisions
EUROPE HAD DEBTS FROM WORLD WAR I AND
GERMANY HAD REPARATIONS TO PAY.
FOREIGN NATIONS WERE FORCED TO CURTAIL THEIR
PURCHASE OF AMERICANS GOODS.
FOR EXAMPLE,AMERICAN
FARMERS LOST 1/3
OF THEIR MARKET.
FARM PRICES PLUMMETED
AND THOUSANDS OF FARMERS
WENT BANKRUPT.
TO COMPOUND THE EFFECTS OF THE ECONOMIC SLUMP,FARMERS WOULD EXPERIENCE ONE OF THE WORST, LONGEST DROUGHTS IN HISTORY DURING THE 1930S…
...CREATING A “DUST BOWL” OF UNPRODUCTIVE, ERODED
FARMLAND.
THE DUST BOWL: CAUSES• OVERCULTIVATI
ON OF LAND IN THE GREAT PLAINS
• SUSTAINED DROUGHT THROUGHOUT REGION
• HIGH WINDS BLEW AWAY LOOSE TOPSOILA dust cloud approaches the town of Stratford,
Texas, in 1935
THE DUST BOWL: IMPACT
• MORE THAN 500,000 LEFT HOMELESS
• STORMS BLEW LARGE AMOUNTS OF DUST FROM THE PLAINS INTO CITIES SUCH AS CHICAGO AND BUFFALO
• “RED SNOW” FELL ON TOWNS IN NEW ENGLAND
THE PLIGHT OF THE “OKIES”
• FARMERS FROM OKLAHOMA FLED THE DUST BOWL
• WENT TO CALIFORNIA AND THE INTERMOUNTAIN WEST FOR FARM JOBS
• NEARLY 15 PERCENT OF OKLAHOMA’S POPULATION BECAME MIGRANTS
A woman and her child rest beside their car during their trip
west
THREE YEARS LATER, INTERNATIONAL TRADE PLUMMETED TO 33% OF
ITS 1929 LEVEL.
THE LOSS OF SUCH TRADE WAS
DEVASTATING AND HAD RIPPLE EFFECTS, SIMILAR TO THE BANK FAILURES.
IN SUMMARY, THE SMOOT-HAWLEY TARIFF CREATED TRADE WARS
AND WORSENED
WORLD ECONOMIC CONDITIONS.
HUGE INCREASE IN TAXES HURT COMPANIES AND INDIVIDUALS.
LET’S REVIEW THE MAJOR CAUSES
FOR THE GREAT DEPRESSION:
1. OVERPRODUCTION (RESPONDING TO HIGH DEMAND FOR GOODS)
2. BANKING & MONEY POLICIES (LOW INTEREST RATES, BUYING ON CREDIT, RAISE IN INTEREST RATES, LOW RESERVE RATES FOR BANKS.)
3. STOCK MARKET PRACTICES (BUYING ON MARGIN, BANK LOANS FOR STOCK PURCHASES)
4. POLITICAL DECISIONS (SMOOT-HAWLEY TARIFF, INCREASE INCOME TAX)
HOOVER’S RESPONSE• PRESIDENT HOOVER
OVERWHELMED• BELIEVED THAT PRIVATE
CHARITY WAS BEST SUITED TO SOLVE PROBLEMS
• MOST EFFORTS FAILED• RECONSTRUCTION
FINANCE CORPORATION ACHIEVED SOME SUCCESS
• HISTORY SHOWS VERY LITTLE DIFFERENCE BETWEEN HOOVERS’ INITIAL PROGRAMS AND ROOSEVELT’S, ONLY SIZE.
President Herbert Hoover
HOOVERVILLES• SETTLEMENTS OF
SHACKS INHABITED BY TRANSIENTS AND UNEMPLOYED
• DERISIVELY NAMED AFTER PRESIDENT HOOVER
• MANY CITIES AND TOWNS HAD AT LEAST ONE
THE BONUS ARMY• PATMAN BILL WAS TO
MOVE UP BONUS PAYMENTS FROM 1945 TO 1933
• VETERANS CAMPED NEAR THE CAPITOL TO SUPPORT THE BILL
• BILL FAILED IN CONGRESS
• HOOVER’S REMOVAL OF VETS MADE HOOVER APPEAR HEARTLESSWith the U.S. capitol visible in the
distance, shacks erected by the Bonus Expeditionary Force burn
THE ELECTION OF 1932• REPUBLICANS
RENOMINATED HOOVER
• DEMOCRATS NOMINATED FRANKLIN D. ROOSEVELT
• HOOVER’S INABILITY TO SOLVE THE DEPRESSION BECAME THE CHIEF ISSUE
• FDR WON IN A LANDSLIDE
Hoover Roosevelt
THE “NEW DEAL”• NAMED AFTER A
PHRASE IN FDR’S 1932 NOMINATION SPEECH, BECAME THE NICKNAME FOR FDR’S ECONOMIC PROGRAM
• CONSISTED OF THREE SEPARATE ASPECTS:
• RELIEF
• RECOVERY
• REFORMFDR campaigning in 1932
FIRST HUNDRED DAYS
• FIRST 100 DAYS FDR WAS IN OFFICE HE AND CONGRESS PASSED 15 BILLS
GOALS OF THE FIRST NEW DEAL
RELIEF ~ FOR THE UNEMPLOYED
RECOVERY ~ FOR THE ECONOMY
REFORM ~ PREVENT ANOTHER DEPRESSION
RESTORING CONFIDENCE
• 1ST DAY AFTER INAUGURATION CONGRESS MET AND APPROVED THE EMERGENCY BANKING BILL ~ ALLOWED PRESIDENT TO SHUT DOWN BANKS IN ORDER TO ALLOW THEM TO GET THINGS IN ORDER ~ CALLED IT A BANK HOLIDAY
• REFORMING THE FINANCIAL SYSTEM ~ FEDERAL DEPOSIT CORPORATION ~ INSURED BANK DEPOSITS OF UP TO $5000
• SECURITIES AND EXCHANGE COMMISSION ~ REGULATE STOCK MARKET AND MAKE IT SAFER FOR INVESTMENTS
FIRESIDE CHATS• RADIO “TALKS”
• FDR SPOKE PLAINLY WITH AUDIENCE ABOUT ISSUES AND CONCERNS
• USUALLY CONDUCTED IN AN INFORMAL MANNER
FDR addresses the nation during a 1935 fireside chat
HELPING FARMERS
• AGRICULTURE ADJUSTMENT ACT (AAA) – SOUGHT TO END PRODUCTION AND RAISE CROP PRICES
• PROVIDED FINANCIAL AID, GAVE FARMERS MONEY TO NOT PLANT PART OF THEIR LAND OR KILL EXCESS LIVESTOCK
• 1934 FARMERS PRICES BEGAN TO RISE
TVA
• TENNESSEE VALLEY AUTHORITY – BUILT A SERIES OF DAMS ALONG TENNESSEE RIVER VALLEY TO CONTROL FLOODS AND GENERATE ELECTRIC POWER
• REPLANTED FORESTS, CREATED JOBS, AND ATTRACTED INDUSTRY WITH THE USE OF CHEAP POWER
• CRITICS OF TVA CALLED IT A MONOPOLY BECAUSE SMALLER COMPANIES COULD NOT KEEP UP WITH THEM
CCC
• CIVILIAN CONSERVATION CORPS ~ PROVIDED JOBS FOR OVER 2 MILLION MEN 18 – 25
• REPLANTED FORESTS, BUILT TRAILS, DUG IRRIGATION TRENCHES, AND FOUGHT FIRES
OTHER RELIEF PROGRAMS
• CIVIL WORKS ADMINISTRATION – PROVIDED JOBS ON PUBLIC WORKS PROJECTS
• HOME OWNERS LOAN CORPORATION (HOLC) LOANED MONEY WITH LOW INTEREST RATES TO HOME OWNERS WHO COULD NOT MAKE PAYMENTS
• FEDERAL HOUSING ADMINISTRATION (FHA) INSURED BANK LOANS USED FOR BUILDING AND REPAIRING HOMES
• FEDERAL EMERGENCY RELIEF ACT (FERA) – GRANTED FEDERAL FUNS TO STATE AND LOCAL AGENCIES TO HELP THE UNEMPLOYED
PUBLIC WORKS ADMINISTRATION
• BUILT BRIDGES,
SCHOOLS,
AIRPORTS,
ROADS, NAVY
SHIPS
• SPENT MORE
THAN $6
BILLION
NATIONAL INDUSTRIAL RECOVERY ACT
• DEVELOPED CODES OF
FAIR COMPETITION TO
GOVERN INDUSTRIES
• REGULATE MIN.
WAGE & PRICES OF
GOODS
NEW DEAL REFORM MEASURES
• SOUGHT TO ENSURE THAT CONDITIONS LEADING TO DEPRESSION DID NOT REOCCUR
• MANY REFORMS RADICALLY CHANGED AMERICAN SOCIETY
• SEVERAL NEW DEAL PROGRAMSAND REFORMS STILL IN EFFECT TODAY
• SOCIAL SECURITY
• PURE FOOD AND DRUG LAWS
• TENNESSEE VALLEY AUTHORITY
• FDIC
FOOD, DRUG, AND COSMETIC ACT
• SIGNED INTO LAW IN 1938; STRENGTHENED FDA
• SET STANDARDS FOR AND REGULATED QUALITY OF FOOD
• EVALUATED SAFETY AND LEGITIMACY OF DRUGS
• CONTROLLED PRODUCT ADVERTISING
Lash-Lure, a cosmetic eyeliner which blinded at least one
user, was one product banned by the FDA
THE “NINE OLD MEN”• SUPREME COURT
DOMINATED BY
CONSERVATIVES
• FDR UNABLE TO
MAKE APPOINTMENTS
TO COURT
• COURT DECLARED
SEVERAL NEW DEAL
PROGRAMS
UNCONSTITUTIONAL
FDR’S “COURT-PACKING” PLAN
• FDR DETERMINED TO PRESERVE NEW DEAL REFORMS
• INTRODUCED LEGISLATION FOR REVAMPING THE JUDICIARY
• LAW WOULD ALLOW HIM TO APPOINT ONE NEW JUDGE FOR EVERY SUPREME COURT MEMBER OVER AGE 70½
• WOULD INCREASE SUPREME COURT TO A MAXIMUM OF 15 MEMBERS
• PLAN SOUNDLY DEFEATED; FDR LOST POLITICAL SUPPORT
• COURT-PACKING BATTLE ENDED AS A DRAW
THE AMERICAN LIBERTY LEAGUE
• SAW FDR AS A “TRAITOR TO HIS CLASS”
• BELIEVED THE NEW DEAL WAS LEADING THE COUNTRY TOWARD SOCIALISM
• FORMED TO OPPOSE NEW DEAL
THE TOWNSEND PLAN
• PROPOSED A MONTHLY
PENSION OF $200 FOR ALL
CITIZENS OVER 60• TO BE PAID FOR BY A NATIONAL SALES
TAX
• RECIPIENTS REQUIRED TO SPEND
ENTIRE PAYMENT EACH MONTH
• SOCIAL SECURITY ACT
Dr. Francis Townsend
SOCIAL SECURITY ACT OF 1935
• FIRST SUGGESTED
BY FRANCES
PERKINS
• PROVIDED FOR • OLD-AGE PENSIONS
• UNEMPLOYMENT
INSURANCE
• AID TO DEPENDENTS
• FUNDED BY A
PAYROLL TAX
THE LEGACY OF THE NEW DEAL
• ENLARGEMENT OF GOVERNMENT
• DEFICIT SPENDING
• WELFARE STATE
• INSPIRATION FOR FUTURE WELFARE PROGRAMS, SUCH AS LBJ’S “GREAT SOCIETY” FDR shakes hands with Texas NYA
director—and future president—Lyndon Johnson
CRITICS OF THE NEW DEAL
• CONSERVATIVES ACCUSED FDR OF BEING SOCIALIST, BELIEVED HE ONLY WORRIED ABOUT BANKING SYSTEM AND ENSURING PROFITS FOR BUSINESSES
• SENATOR HUEY LONG – CALLED FOR INCREASE TAXES ON THE RICH
• FATHER COUGHLIN – CALLED FOR STRONGER ACTION AGAINST INVESTORS AND BANKERS
END OF THE DEPRESSION
• FEDERAL SPENDING ON AN UNPRECEDENTED LEVEL FAILED TO STOP IT
• THE LARGEST ENTRANCE OF THE FEDERAL GOVERNMENT INTO THE AMERICAN ECONOMY
• MADE THE FEDERAL GOVERNMENT INTO A “BROKER STATE” BETWEEN LABOR AND CAPITAL
• SOCIAL PROGRAMS AND “SAFETY NET”
• BROUGHT FED GOV’T INTO THE LIVES OF NEARLY ALL WESTERNERS
• WWII ENDED THE DEPRESSION