The Great Depression BeginsThe Great Depression Begins

US HISTORY – Chapters 30-33US HISTORY – Chapters 30-33

Reading NotesReading Notes

• Read Pages 386-387 Read Pages 386-387 • List two causes and two effects for List two causes and two effects for

overproduction and under consumptionoverproduction and under consumption

• Read Pages 388-389Read Pages 388-389• List and explain two actions the federal List and explain two actions the federal

government took that made the Depression government took that made the Depression worseworse

Reading NotesReading Notes

Government ActionsGovernment Actions

Speculative BubblesSpeculative Bubbles

• Read Pages 390-391Read Pages 390-391• What is a speculative bubble?What is a speculative bubble?• What are examples of speculative bubbles?What are examples of speculative bubbles?

Speculative BubblesSpeculative Bubbles

Causes of a Sick EconomyCauses of a Sick Economy

1.1. Decline in IndustryDecline in Industry• Foreign CompetitionForeign Competition

• Decreased DemandDecreased Demand

• Outdated machineryOutdated machinery

2.2. Decline in Home Construction Decline in Home Construction • Impacts all associated businessesImpacts all associated businesses

More CausesMore Causes

3.3. Agricultural CrisisAgricultural Crisis• Decline in demand for farm goodsDecline in demand for farm goods

• Falling pricesFalling prices

• Rising farm foreclosuresRising farm foreclosures

4.4. Easy consumer creditEasy consumer credit• Rising debt creates reduced consumer spendingRising debt creates reduced consumer spending

5.5. Uneven distribution of incomeUneven distribution of income• More goods than consumersMore goods than consumers

The Stock MarketThe Stock Market

• What is stock?What is stock?• Individual ownership of a portion (share) of a company Individual ownership of a portion (share) of a company

that is publicly traded (bought and sold)that is publicly traded (bought and sold)

• How do you make money?How do you make money?• Buy low and sell high (difference = profit)Buy low and sell high (difference = profit)

• Buy and hold (company value increases over time)Buy and hold (company value increases over time)

• What are the risks?What are the risks?• No insurance or guarantees of returnNo insurance or guarantees of return

The Stock Market Crash – The Final The Stock Market Crash – The Final Straw!!!Straw!!!• No rules!!!No rules!!!

• Speculation – buying and selling with the intent Speculation – buying and selling with the intent of making quick, large profitsof making quick, large profits

• Buying on margin – buying a stock with a small Buying on margin – buying a stock with a small down payment and borrowing the rest (up to down payment and borrowing the rest (up to 90%)90%)

• See any problems?????See any problems?????• Crash – 10/29/29 (16 million shares traded)Crash – 10/29/29 (16 million shares traded)

• By mid-November investors lost $30 BillionBy mid-November investors lost $30 Billion

The Response to the Economic CollapseThe Response to the Economic Collapse

What would you tell those kids?What would you tell those kids?

CONSERVATIVE RESPONSELIBERAL RESPONSE

RADICAL RESPONSE

President Hoover’s ReactionsPresident Hoover’s Reactions

• Philosophical ViewPhilosophical View• Remain optimistic!Remain optimistic!

• ““Any lack of confidence in the economic future…..is foolish”Any lack of confidence in the economic future…..is foolish”

• Rugged individualism – succeed through effortRugged individualism – succeed through effort

• Limited government involvement in economyLimited government involvement in economy• Federal building projects – Boulder DamFederal building projects – Boulder Dam• Federal Farm Board – help raise farm pricesFederal Farm Board – help raise farm prices• Reconstruction Finance Corp – loan money to banks, Reconstruction Finance Corp – loan money to banks,

industries, etc. (up to $2 billion)industries, etc. (up to $2 billion)

The Bonus ArmyThe Bonus Army

• WWI veterans scheduled to receive a WWI veterans scheduled to receive a ‘bonus’ in 1945 (about $500 each)‘bonus’ in 1945 (about $500 each)

• 20,000 march to Washington in 193220,000 march to Washington in 1932• WE WANT OUR BONUS NOW!!!!WE WANT OUR BONUS NOW!!!!• Created a shantytown outside of WashingtonCreated a shantytown outside of Washington

Bonus ArmyBonus Army

Bonus Army at the CapitolBonus Army at the Capitol

End of the Bonus ArmyEnd of the Bonus Army

• Hoover orders them to leave (most obey)Hoover orders them to leave (most obey)• 2000 stay and are removed by US Army 2000 stay and are removed by US Army

with force (gas and bullets)with force (gas and bullets)• Nation is shocked!Nation is shocked!

Presidential ReactionsPresidential Reactions

• HOOVERHOOVER

1.1. Voluntary cooperation Voluntary cooperation between banksbetween banks

2.2. RFC to loan $ to banks, RFC to loan $ to banks, rr, and businessrr, and business

3.3. RFC to loan $ to statesRFC to loan $ to states

4.4. Federal Building Federal Building ProjectsProjects

5.5. Federal Farm BoardFederal Farm Board

• ROOSEVELTROOSEVELT

1.1. CCC – jobs for young CCC – jobs for young men’men’

2.2. AAA – help farmersAAA – help farmers

3.3. Truth-in-Securities – Truth-in-Securities – force companies to force companies to provide accurate infoprovide accurate info

4.4. Emergency Banking Act Emergency Banking Act – help banks– help banks

5.5. FERA - $ to statesFERA - $ to states

National Impacts 1929-33National Impacts 1929-33

• Bank FailuresBank Failures• By 1933, 6000 banks closed (25% of all banks)By 1933, 6000 banks closed (25% of all banks)• 9 million individual savings accounts lost9 million individual savings accounts lost

• Manufacturing output cut in halfManufacturing output cut in half• 85,000 businesses went bankrupt85,000 businesses went bankrupt

• UnemploymentUnemployment• 1929 – 3% of eligible workers unemployed1929 – 3% of eligible workers unemployed• 1933 – 25% of eligible workers unemployed1933 – 25% of eligible workers unemployed• Remaining workers take reduced pay and hoursRemaining workers take reduced pay and hours

Impacts – Urban AreasImpacts – Urban Areas

• Widespread homelessness Widespread homelessness • Creation of shantytowns (Hoovervilles)Creation of shantytowns (Hoovervilles)• Begging, soup kitchens, bread linesBegging, soup kitchens, bread lines• Destruction of familiesDestruction of families• ““Riding the rails” > 2 million menRiding the rails” > 2 million men

• Increased racial tensionsIncreased racial tensions• Competition for employmentCompetition for employment

Impacts in Rural AreasImpacts in Rural Areas

• Huge numbers of farm foreclosures (over Huge numbers of farm foreclosures (over 400,000 between 1929-1932)400,000 between 1929-1932)• Creates migrant familiesCreates migrant families

• Farmers move West for workFarmers move West for work

• Environmental issuesEnvironmental issues• Overproduction destroys soilOverproduction destroys soil• *Extreme drought creates ‘Dust Bowl’*Extreme drought creates ‘Dust Bowl’

HomelessHomeless

HOOVERVILLES

Homeless Tent City Homeless Tent City

UnemployedUnemployed

Sleeping in thePark Unemployment March

Camden, NJ

Soup Lines / Bread LinesSoup Lines / Bread Lines

Waiting for the TrainWaiting for the Train

Dust BowlDust Bowl

Dust BowlDust Bowl

• Creates massive Creates massive relocation of Plains relocation of Plains farmers to West farmers to West CoastCoast

• Migrant farmersMigrant farmers

Franklin Delano RooseveltFranklin Delano Roosevelt

• Elected President 1932 (Democrat) – landslide Elected President 1932 (Democrat) – landslide victoryvictory

• Promised “A New Deal for the American People”Promised “A New Deal for the American People”• Three goals:Three goals:

• Relief for the needyRelief for the needy• Economic recoveryEconomic recovery• Financial reformFinancial reform

• Used radio broadcasts to explain goals to the Used radio broadcasts to explain goals to the people – “Fireside chats”people – “Fireside chats”

First Hundred DaysFirst Hundred Days

• FDR rushed through legislation to help the FDR rushed through legislation to help the American peopleAmerican people• 11stst action – close the banks, send in bank action – close the banks, send in bank

examiners and new $examiners and new $• RESTORE CONFIDENCE RESTORE CONFIDENCE

Financial ReformFinancial Reform

• Glass-Steagall Banking Act of 1933 – Glass-Steagall Banking Act of 1933 – provide federal insurance for individual provide federal insurance for individual accounts (FDIC)accounts (FDIC)

• Federal Securities Act requires companies Federal Securities Act requires companies to:to:• Provide complete factual financial information Provide complete factual financial information

about the companyabout the company• Created rules for ‘insider’ informationCreated rules for ‘insider’ information

Economic ReformEconomic Reform

• Agricultural Adjustment Act – raise prices Agricultural Adjustment Act – raise prices by lowering productionby lowering production

• National Industrial Recovery Act – promote National Industrial Recovery Act – promote fair business practicesfair business practices

• National Labor Relations Act (Wagner Act) National Labor Relations Act (Wagner Act) – protects workers from unfair labor – protects workers from unfair labor practicespractices

Relief for the NeedyRelief for the Needy

• JobsJobs• Civilian Conservation Corp (CCC) provided Civilian Conservation Corp (CCC) provided

jobs for young men building roads, parks, and jobs for young men building roads, parks, and planting treesplanting trees

• Works Progress Administration (WPA) – Works Progress Administration (WPA) – created jobs for 8 million people in everything created jobs for 8 million people in everything from construction to musicfrom construction to music

More Relief for the NeedyMore Relief for the Needy

• Federal Housing Administration – Federal Housing Administration – government loans for home mortgages government loans for home mortgages

• Social Security Act provides:Social Security Act provides:• Retirement insurance – supplemental insurance Retirement insurance – supplemental insurance

for retirees 65 or olderfor retirees 65 or older• Unemployment compensationUnemployment compensation• Aid to families with children and the disabledAid to families with children and the disabled

Opponents to the New DealOpponents to the New Deal

• Supreme Court RulingsSupreme Court Rulings• FDR tries to “pack” the courtFDR tries to “pack” the court

• Wants 6 additional Justices added – Congress says NO!Wants 6 additional Justices added – Congress says NO!

• American Liberty LeagueAmerican Liberty League• Government should respect the rights of individuals Government should respect the rights of individuals

and property (especially rich individuals!!)and property (especially rich individuals!!)

• Civil Rights – No legislation to limit Civil Rights – No legislation to limit discrimination or create equality for African-discrimination or create equality for African-Americans!!!Americans!!!

Long Term Impacts of the New DealLong Term Impacts of the New Deal

1.1. Deficit spending – spending more money Deficit spending – spending more money on programs than the government receives on programs than the government receives in revenuein revenue

2.2. Expanding government’s role in the Expanding government’s role in the economyeconomy

3.3. Protection of workers’ rightsProtection of workers’ rights• National Labor Relations BoardNational Labor Relations Board

More Impacts More Impacts

4.4. Banking and Finance ReformBanking and Finance Reform

5.5. Social SecuritySocial Security

6.6. Environmental protectionEnvironmental protection• Tennessee Valley Authority – built dams to Tennessee Valley Authority – built dams to

generate electricity and prevent floodinggenerate electricity and prevent flooding

End of the Depression?End of the Depression?

• Although the New Deal programs relieved Although the New Deal programs relieved the nation’s suffering and provided hope for the nation’s suffering and provided hope for the American people……..the American people……..

• The massive spending for equipment and The massive spending for equipment and supplies for WWII truly ended the Great supplies for WWII truly ended the Great Depression!!!Depression!!!