Unit 5 Notes PDF

8/3/2019 Unit 5 Notes PDF

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The Great Depression and The New Deal

In this unit, we will cover what happened in

the United States during the 1930s. After abooming economy in the Roaring 20s,Americans faced unemployment, high prices,hunger and despair.

When so many people are needy, who

should help?

Should government provide assistance?

We will answer these questions in our study

of the Great Depression & New Deal!

Roaring20s:

Many people investingin Stock Market

1928 Hoover electedPresident

1929

Stock MarketCrash

1931

16%unemployment

1932 Bankrunscause panic

1932: Unemploymentreaches 25%; Hooverloses to Roosevelt (FDR)

1933 FDRsworn in & NewDeal begins


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Roaring 20s: America BEFORE the Great Depression

The Go-Go Stock MarketDuring the 1920s, stock prices rose

greatly. So many people started to

invest their money in the Stock

Market.

Thesepeople were speculating and

buying on margin.

To speculate is when you buy

stocks and bonds hoping to quickly

make a profit.

Since prices kept going up & up,

many people bought more & more

stockseven when they didnt have

the money to pay for them! Buying

on margin is when people can only

afford to pay a small percentage of a

stocks price so they have to borrow

the rest of the money in order to buy

the stock.


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Consumerism

Businesses grew even bigger

during the 1920s. They

produced more & more

products, often faster than

consumers could buy them! In

fact, because companies

overproduced products, they

would later lay offworkers inthe early 1930s.

Even worse, many of these consumer items were being purchased

on credit which meant that they would purchase an item and pay

for it later. Many people simply did not have the cash to purchase

larger more expensive items, such as a car, a washing machine, or

a stove.

So people even bought second homes in

faraway places like Florida on credit!

When people would lose their jobs later,

they could not pay their debts and banks

or stores would go out of business!

A piano bought on

an installment plan


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Get-Rich Schemes


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Hard-Hit 30s: America DURING the Great Depression

Definition of the Great DepressionThe Great Depression was the worldwide

economic downturn that began in 1929

and lasted until World War II. The

Depression began in the United States,

but spread to the rest of the world.

An economic depression is really a

deep, long-term recession in which

production, prices & trade drop

dramatically & unemployment

skyrockets!

See the chart below:


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Causes of the Great DepressionThere were many factors that led to the Great Depression. Five of

the main factors were

1.Easy access to credit2.A decline in overall spending3.Stock Market crash of 19294.A crisis in the farming industry5.Bank runs


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The Stock Market CrashThe Stock Market peaked in September of 1929. After that, prices

dropped, sometimes in small amounts, and sometimes in huge

drops.

On October 29, 1929, the stock market crashed. On that day,

known as Black Tuesday, 16.4 million stocks were sold, causing

prices to plummet! Many people who bought stocks on margin

were now in debt because their stocks were worth less than what

they had paid for them. In fact in the next few months investors

lost $30 billion (the amount the nation spent on fighting WWI).


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The Banking CrisisThe stock market crash also hurt banks, causing a a crisis that

unfolded over the next three years, peaking in 1932. After the

crash, people panicked and went to banks to withdraw (take out)

their money. This was known as the bank run.

This was a problem because banks do not keep all of their money

in their vaults. Each bank only had to keep a small portion of the

money, allowing banks to loan out money to other customers.

Example: A person deposits $100 in the bank. The bank only has

to keep $10 in its vault. It can loan out the other $90 in hopes of

making money by investing or charging interest on loans.

Men trying to withdrawmoney from their bank

accounts

A bank run


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So what happenedwhen many panicked people withdrew their

money at the same time, and the banks did not have enough money

in the vault to cover withdraws? Many banks went out of

business and had to close.

Nearly 400 banks failed in 1931 and 1932. By 1933, over 20% of

the banks that were in business in 1930 had gone out of business,

taking the savings of millions of people with them!

As news of bank failures spread, worried depositors rushed tolocal banks like this one in hopes of getting their money out before

it was too late. Bank failures were part of the general economic

collapse brought by the stock market crash, falling farm prices &

the decline of industry.

Banking Crisis (Continued)


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The Unemployment CrisisWith stocks down people started to spend less. Prices started to

drop with this less demand and huge supplies caused by

overproduction.

Businesses went bankrupt and workers lost their jobs. From 1929-

1933, almost 1 in 7 businesses failed. By 1933, approximately 13

million people were unemployed. That means 25% of

Americans, or 1in 4 Americans, were out of work. Today, in a

very badeconomy, there is only 8% unemployment.


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Life During the Great Depression

Without a job or a good-paying job, millions of people were homeless &

hungry. People were forced to live wherever they could, including in

parks, cars, and shantytowns. Shantytowns were small groups of

shacks. Some shacks were made with crates while others were built out

of wood boards and tar paper.

Over time, Americans called these Hoovervilles as a way to

criticize President Hoover.


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The Dust Bowl

During the 1920s, Great Plains

farmers over-planted their fields,using up the nutrients in the

ground.

In the 1930s, a drought struck the Midwest and Southwest regions

of the United States. Because there was very little grass and trees

to hold down the soil, large gusts of wind were able to pick up

millions of tons of dust and carrying it to the East coast.

Thousands of farmers affected by these Dust Bowl moved from the

Plains to the Pacific Coast (California, Oregon, and Washington).


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Dust Bowl Ditties

The great singerWoody Guthrie was a Dust Bowl

refugee from Oklahoma. (Thats why he was called

an Okie.) To find out what it was like to be a poor rural farmer during

the Depression analyze his lyrics for the song My Oklahoma Home.

When they opened up the strip I was young and full of zip

I wanted some place to call my homeAnd so I made the race and I staked me out a placeAnd settled down along the Cimarron

It blowed away (blown away), it blowed away (blown away)My Oklahoma home, it blown awayWell it looked so green and fair when I built my shanty thereMy Oklahoma home, it blown away

Well I planted wheats and oats, got some chickens and some shoatsAimed to have some ham and eggs to feed my face

Got a mule to pull the plow, I got an old red muley cowAnd I also got a fancy mortgage on this place

Well it blowed away (blown away), it blowed away (blown away)All the crops that I've planted blown awayWell you can't grow any grain if you ain't got any rainEverything except my mortgage blown away

Well it looked so green and fair when I built my shanty thereI figured I was all set for lifeI put on my Sunday best with my fancy scalloped vest

Then I went to town to pick me out a wife

She blowed away (blown away), she blowed away (blown away)My Oklahoma woman blown awayMr as I bent to kiss her, she was picked up by a twisterMy Oklahoma woman blown away

Chasin' that dust cloud up ahead

http://viewpure.com/ky-HYHrm oE


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Who should help?

Charitable organizations and public agencies gave out free and

low-cost food at soup kitchens and on breadlines.

line

Breadline nearthe BrooklynBridge

Soup Kitchen

Read the

Breadline

source on

textbook p 508


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Should the Government help?President Hooverdid not believe that the government should

provide direct relief to citizens. He felt that businesses and

charitable organizations should work together to help people.

People began to blame President Hoover for the struggles they

were having. They felt that he was not working to make their lives

better.

However, President Hoover did have a plan to create jobs for the

unemployed. His plan was to build a dam on the Colorado River.

It would border both Nevada and Arizona.

Construction of theBoulder Dam (nowcalled the Hoover Dam)

PBS: American Experience also has a documentary about the constructionof the dam. http://www.pbs.org/wgbh/americanexperience/films/hoover/


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The Election of 1932

The Republican Party re-nominated President Hoover as the

candidate for the presidential election.

The Democratic Party nominated Franklin Delano Roosevelt

(FDR), the governor of New York. People felt that he was a

confident man who was willing to work hard to improve the

economy.

FDR won the election by a large margin and was sworn in as

President in March of 1933.

Herbert Hoover Franklin DelanoRoosevelt

Does confidence REALLY matter?

http://www.pbs.org/wgbh/americanexperience/features/bonus-video/presidents-enemy-fdr/


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FDRs First New Deal

FDR and his Brain Trust developed the New Deal, a plan to

correct the problems of the Great Depression.

The Brain Trust was a

group of professors,

lawyers, and journalists

whom FDR picked to help

him develop his plan and to

create the policies by which

he would run his

administration.

During FDRs first 100 days, known simply as The Hundred

Days, Congress passed more important laws than any previous

president. (Currently, people still judge a president by how many

laws Congress passes in that presidents first 100 days in office.)

FDR & his Brain Trust believed that government should

intervene and help those in need. To learn more watch this

video: How Should Presidents Handle a Crisis?

http://www.pbs.org/wgbh/americanexperience/features/bonus-video/presidents-crisis-fdr/


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New Deals Relief, Recovery & Reform

President Roosevelt and Congress created many new

agencies with the United States government. These

agencies would be nicknamed the Alphabet Soup

agencies because people often used abbreviations for each

agencys name. The three goals of the New Deal were relief,

recovery, and reform.

RELIEF ACTS

In order to help farmers, Congress

passed the Agricultural Adjustment

Act (AAA-1933) to raise the price of

crops by lowering the supply of the

crops. The government paid farmers to

not grow on parts of their farms.

The Civilian Conservation Corps

(CCC-1933) provided jobs for young

men aged 18 to 25. The men built

roads and bridges, created parks, planted trees, and worked onprojects that dealt with flood control and soil erosion (that would

prevent another Dust Bowl).

The CCC built thelake in High Point, NJ


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Recovery

The Tennessee Valley

Authority (TVA-1933)provided men with construction

jobs. Workers repaired older

dams and built new dams.

These dams and hydroelectric

power stimulated economic

growth.

The National Industrial Recovery Act (NIRA-1933) gave money

to states so that the states could build schools and community

buildings.

A Post Office

in Alabamabuilt duringthe 1930s


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ReformTo save the banking industry, FDR passed the Emergency BankingAct that stopped bank runs by issuing bank holidays.

The Federal Deposit Insurance Corporation

(FDIC-1933) The FDIC originally provided up

to $5000 of federal insurance for individual

bank accounts. (Currently, each account is

federally insured up to $250,000.)

The Federal Securities Act was created to protect investors. So,

people could feel confident to put their money back in the banks

because the government promised to protect the account, even if

the bank went bankrupt!

FDR also reformed the stock

market. The Securities &

Exchange Act established the

Securities and Exchange

Commission (SEC-1934) to

regulate Wall Street, stock

brokers, and investment

banks.


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FDRs Friends & FoesNot everyone agreed with FDRs New

Deal approach. Senator Huey Long,

from Louisiana, strongly disagreed

with President Roosevelts New Deal.

Longs plan was known as Share-Our-

Wealth. He wanted wanted a limit on

how much money a person could have,

so everyone would have the same

amount of money.

FDRs wife was more than a friend; she

was his New Deal partner. Eleanor

Roosevelt was a social reformer who

combined her political skills with her

desire to help others.

The first lady traveled the nation, seeing the conditions in which

people lived, and then reported her observations to her husband,

President Roosevelt. She pushed her husband into more reforms,

including the Second New Deal.

Senator Huey Long

How influential was she?http://www.pbs.org/wgbh/americanexperience/features/bonus-video/presidents-firstlady-fdr/


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The 2nd New Deal: Relief & Stability

The Second New Deal is also known as

the Second Hundred Days. During thistime, President Roosevelt pushed for

more extensive relief for farmers and

workers. President Roosevelts wife,

Eleanor, encourage him to do this.

Still concerned with unemployment,FDR pushed for the Works Progress

Administration (WPA-1935) to create

as many jobs as possible, as fast as

possible. Workers built airports and

public buildings, in addition to building

new and repairing old roads. In fact,

Briarcliff Middle School was a WPA

project!!


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The 2nd New Deal: Relief & Stability

The Social Security Act created the social security system. Thelaw had three main parts:

1.It provided old-age insurance (a retirement plan) forretired people who were at least 65 years old.

2.It gave unemployment benefits to people out of work.3.It provided aid to families with dependent children or

disabled family members.

A social securitycard. Each personhas his or her ownunique number.


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New Deal Legacy

The New Deal did not completely END the Depression. However,FDRs policies did help millions of Americans who were facing

hunger & unemployment.

Here are the legacies of the New Deal:

1.Americans expect a larger role by our government in oureveryday life.

2.Many American want government to intervene financially inorder to relieve an economic crisis

When the economy struggled

in 2008, Americans were

about to elect a new

President.

According to this cover, the

writer believed President

Obama would act like FDR

and have the government

greatly involved.


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Two Economic Theories

1. Keynesian Theory

John Maynard Keynes was an economist who promoted the idea ofdeficit spending. Deficit spending is when a government spendsmore money than it has received in revenues (income/ profit).

Keynes believed that deficit spending could stimulate the economy

to improve.

2. Austrian Theory

F.A. Hayek was an economist who promoted the idea of thebusiness cycle. He said that economies have ups and downs.

Hayek believed that economists need to study the impact thathuman behavior has on all economic activity. If economistsunderstand this, they can work to correct past economic mistakesand predict future economic behavior.

F.A. Hayek John Maynard Keynes

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Unit 5 Notes PDF