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The Great Depression and New Deal
1928-1941
Unit 8- Boom to Bust
The 1920’s were a time of superficial prosperityBusinesses were doing wellWages were increasingPeople bought all kinds of “luxury” items
Cars, toasters, washers, vacuums, sewing machines
People thought the good times would continue forever and bought fancy items on credit or with installment plans, assuming they would just pay it later.
The Good Times
As the 1920s advanced, economic prosperity slowed, but few noticed
1. Industries were in trouble Railroads, lumbering and mining
industries were no longer making profits Companies had to start laying people off People without jobs do not have money to
spend, which hurts other businesses People were also laid off because a lot of
companies began using machines to do the work
Trouble Ahead
2. Farmers were in Debt
During WWI, farmers produced a lot and sold a lot of crops.
After WWI farmers should have slowed production, but they didn’t and were unable to sell all their crops.
Farmers needed money and took out loans
Many farmers never repaid their loans which caused rural banks to fail
Many farms were foreclosed on
3. Consumers had less money to spend
As businesses failed, wages were cut and people could not spend money on “extra” items.
Since nobody was buying, more businesses failed, causing more unemployment, which caused even less money to be spent in stores.
4. Living on credit
People were living above their meansPeople could not afford to buy items out right so
they paid for them on credit and assumed they would pay it back later.
Credit CardsInstallment Plans -paying off the total cost in
monthly paymentsBuying Stocks on the Margin- many wanted to
invest in the stock market, but could not afford to pay the full amount of the stock so they borrowed from a broker (took out a loan to pay for it)
Many couldn’t pay back the full amount of their loans or were so strapped for cash they couldn’t spend money on other items, which hurt other businesses, causing more people to become unemployed.
.
5. Uneven distribution of wealth
Rich got richer, poor got poorer
Most earned less than $2,500 a year
Had no savingsRelied on credit
1928- Hoover wins the electionLittle focus on the economyPeople think the good times will continue
People believed investing in the stock market was the key to richesDow Jones Industrial Average was high (Bull
Market)People began engaging in Speculation
Buy low, sell highMake quick moneyMany didn’t realize the risk, thought the
market would continue to increase
Herbert Hoover Takes Over
Black TuesdayBy early September 1929 many began to
question the strength of the marketPeople began selling their stocks
Black Tuesday- October 29, 1929Confidence in the market collapsedPeople began selling their stocks for
pennies16 million stocks sold
Could not pay back their loansCaused banks to close, by November
investors had lost 30 billion dollars
How did the stock market crash help cause the Great Depression?
Stop and Think!
1929-1940- time period where the economy plummeted and unemployment rose
Banks FailedPeople panicked and went to their banks demanding
their moneyMany banks invested the money in the stock market
and did not have the money to give backMany lost their entire life savingsThe government did not insure bank accountsBy 1933-11,000 of 25,000 banks failed
Businesses FailedThe Gross National Product (total output of goods) was
cut from 104 billion to 59 billion90,000 businesses failed
Unemployment RoseFrom 3% to 25%
The Great Depression Begins
The Depression Spread throughout the worldEuropean nations were still trying to
recover from WWIMany nations relied on the U.S. for loansMany also relied on the U.S. to buy
goodsU.S. passed the Hawley Smoot Tariff Act
Highest protective tariffs in U.S. History
Designed to protect American farmers and businesses
It failed-It stopped Europeans from buying
American goodsIncreased unemploymentencouraged other nations to pass
similar tariffs
The Depression in CitiesMany lost their homes, jobsHomelessness increasedShanty towns (“Hoovervilles”) emerged-
little towns consisting of shacksSoup kitchensBread linesThere was no direct relief for families
Cash payment or food provided by the government
African-Americans and minorities were hit even harder
Hardships and Suffering
The Depression in Rural AreasFarms were foreclosed on
The Dust BowlDrought struck in the 1930sFor decades farmers in the Midwest broke up
farmland, removing the protective grass covering, exposing dirtLeaving a lot of land unusableWhen the drought struck and winds picked up dust
became unbearableHardest hit was Kansas, Oklahoma, Texas, New Mexico,
and ColoradoMany abandoned their farms and moved to California
Hardships and Suffering
http://www.history.com/topics/1930s/videos#america-black-blizzard
• Write a letter or diary entry explaining what life was like during the Stock Market Crash and/or Great Depression.
• You can portray yourself as a child, banker, mother, the President, etc.
• ¾’s-1 page; turn in when you are finished
Writing Activity
Hoover tried to reassure Americans that the nation’s economy was sound.
Believed government’s role was to encourage and facilitate cooperation not control it
Americans values individualism therefore Hoover opposed any form of federal welfare or direct relief.Felt it would weaken peoples self-respect
His answer to the problem was to let individuals, charities and local organizations pitch in and help.
Hoover’s Approach
Why was Hoover reluctant to help people during the Depression?
Stop and Think!
Franklin Delano RooseveltDemocrat, elected in the election
of 1932Between the time of election and
the time he took office, FDR worked to pick advisers known as the “Brain Trust”.
I. President Franklin D. Roosevelt, along with his wife Eleanor, wanted to restore the nation’s hope and build confidence.A. New Deal- the relief, recovery, and reform program that changed the role of the government to a more active participant in solving problems.B. Roosevelt rallied a frightened nation in which one in four workers was unemployed.
http://www.history.com/topics/1930s/videos#fdr-a-voice-of-hope
Relief: bring immediate help to those who need it
Recovery: “pump-priming” temporary programs to restart the flow of consumer demand
Reform: permanent programs to avoid situations causing contractions and insurance for citizens against economic disaster
http://www.history.com/topics/great-depression/videos#the-new-deal-how-does-it-affect-us-today
The 3 R’s
- Focused on relief, recovery, creation of jobs, and stimulating the economy.
1. Banks- first step to restore nation’s confidence Emergency Banking Act- authorized the
government inspect the financial health of banks (closed until passed inspection)
Federal Deposit Insurance Corporation (FDIC)- insured all bank deposits (up to $5,000)
Roosevelt also decreased the value of the U.S. currency by taking it off the gold standard.
First Hundred Days (March-June 1933)
- The Supreme Court struck down some of FDR’s programs, demanding for the creation of the Second New Deal.
Included more social welfare benefits, stricter controls over business, stronger support for labor unions, and higher taxes on the rich.
The Second New Deal (Second Hundred Days)
Computer labResearch agencies in the chart and answer
the following:
1. What did it do?2. Which R?3. Is it still around today?
New Deal Alphabet Agencies
- FDR was reelected in 1936; however, he encountered much criticism over his programs.
FDR tried to “pack” the Supreme Court by asking Congress if he could appoint six new justices to replace the existing justices that were over the age of 70.
FDR’s intention was to appoint justices who supported his programs and ideas. (Congress did not allow this to happen)
Court Packing
Fireside Chats- A series of thirty evening radio
speeches broadcasted to the American people reassuring them that the nation was going to recover.
- -President Franklin D. Roosevelt did this between 1933 and 1944.
- -Sometimes beginning his talks with "Good evening, friends", Roosevelt urged listeners to have faith in the banks and to support his New Deal measures.
- -The "fireside chats" were considered enormously successful and attracted more listeners than the most popular radio shows.
- - Roosevelt continued his broadcasts into the 1940s, as Americans turned their attention to World War II.
http://www.history.com/topics/great-depression/speeches#fdrs-fireside-chat-on-dust-bowl
In 1938, FDR scaled back on the New Deal policies and unemployment rose again.
Production and unemployment wouldn’t match pre-1929 levels until the U.S. entered WWII and industries began production of war materials.
However, the New Deal did provide short-term relief to many.
End of the Great Depression?
People now looked to the government for help in times of need.Government is responsible for social welfare
Thousands of federal jobs were created to maintain new agencies.
Government became active in settling labor disputes.
Greatly regulated business- 40 hour work week, minimum wage, etc.
Ushered in an era of increased taxes paid by citizens
http://www.history.com/topics/great-depression/videos#hoover-dam-true-giant
http://www.history.com/topics/great-depression/videos#tennessee-valley-authority---natures-power-harnessed
Long Term Impact