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Ch. 22: The Great Depression Begins
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Section 1: The Nation’s Sick Economy
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Economic Troubles 1920s- superficial prosperity
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Industries Key industries barely make profit Railroads, textiles, steel Mining/lumber Decreased demand Housing starts decrease
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Farmers Suffered the most High price/demand during war Decreased after Oversaturate the market Can’t pay loans = banks fail Price supports
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Consumers Late 1920s- Americans buying less Rising prices Stagnant wages Income distribution credit
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Credit Living beyond their means Interest Easily available
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Income 1920s- Rich richer, poor poorer Top 1%’s income rose 75% All Americans- rose 9% +70% families under minimum standard of living Most can’t afford new products
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Herbert Hoover Election of 1928 Secretary of Commerce under last 2 POTUS “Republicans led nation to prosperity of 20s”
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Stock Market 1929- most confident about economy More people invest in stocks Dow Jones Industrial Average Speculation Quick profit, ignore risks Buying on margin Down payment on stock, borrow the rest
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Federal Reserve Concerned about stock practices Make harder to offer margin loans Corporations provide cash for loans
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Stock Market Crashes September 1929- stock prices peak and fall Investors lose confidence Sell stocks, get out October 24- market takes plunge
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Black Tuesday October 29 Bottom fell out Sell before prices lower 16.4 million shares sold in 1 day People stuck with huge debt; some lost savings By Nov.- lost $30 billion
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Financial Collapse Stock market crash beginning of Great Depression 1929-1940: economy plummets, unemployment skyrockets
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Banks People took money out of banks Banks invested some money in stocks 1929- 600 banks close By 1933- 11,000 of 25,000 banks fail Millions lost savings
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Businesses 1929-1932: GDP from $104 billion to $59 billion 90,000 businesses go bankrupt Millions lose job Unemployment from 3% to 25%
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Worldwide Europe also suffered Less trade between U.S./Europe 1930- Hawley-Smoot Tariff Meant to help American farmers/manufacturers Made things worse World trade falls +40%
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Causes of the Great Depression Tariffs and war debt reduced trade Farming crisis Availability of easy credit Unequal distribution of income
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Section 2: Hardship and Suffering Americans lose jobs and homes Shantytowns Hoovervilles Soup kitchens and bread lines
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Dust Bowl Early 1930s- drought Great Plains Thousands follow Route 66 to California Okies
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Direct Relief
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Social/Psychological Effects 1928-1932: suicide rate rose +30% 3x as many mental patients Sacrifice Penny pinching
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Ch. 23 Roosevelt and The New Deal
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Election of 1932 showed a lot about what Americans wanted Republicans re-nominated Hoover Many Americans blamed him for doing too little Democrats nominated Franklin Delano Roosevelt (FDR)
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Cabinet was known as the “brain trust” Plan to alleviate problems of the great depression was known as the New Deal Phrase was coined from a campaign speech in which Roosevelt promised the American people “a new deal for the American people”
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The new deal focused on three main areas 1. relief for the needy 2. economic recovery 3. financial reform
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Hundred days deal The hundred days March 9- June 16, 1933 Passed more than 15 major pieces of New Deal legislation Significantly increased the gov’s role in the nations economy
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Roosevelts first step was to carry out banking and financial reforms In his second day of office he declared a bank holiday to prevent any further withdrawals Emergency banking relief act- government checked the stability of banks and determined whether a bank could stay open
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Fireside chats Roosevelt addressed the people through radio messages nearly once a week Meant to inform the American population of public issues, explaining clearly the New Deal Measures. Explained why the nations welfare depended on public support of the government and banking system, also explained the banking system to Americans.
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Regulating banking and finance Glass Steagall Act- established insurance of up to $5,000 on people’s savings Federal Securities Act- made corporations provide complete information on all stock offerings and made them liable for false information Securities and Exchange Commission (SEC)- tried to prevent people from “rigging” the stock market for their own profit
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Helping the people in need Agricultural Adjustment Act (AAA)- sought to raise crop prices by lowering production Paid farmers and crop growers to not grow their products Tennessee Valley Act (TVA)- renovated five existing dams and constructed 20 new ones. This created thousands of jobs Civilian conservation corps (CCC)- put men ages 18-25 to work building roads, developing parks, planting trees, and other odd jobs
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National Industrial Recovery Act (NIRA)- Provided states with money to create jobs chiefly in the construction of schools, and other community buildings When those programs failed to make a sufficient dent in the unemployment Roosevelt established the Civil Works Administration CWA- provided 4 million jobs in the winter of 1933-34 alone. The CWA built 40,000 schools and paid the salaries of 50,000 teachers as well as building over a million miles of roads.
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Promoting fair practices The NIRA also established codes of fair practice for individual industries. It created the National Recovery administration (NRA) The NRA set the prices for many products and established standards The goal of the NRA was to promote economic recovery by stopping the trend of wage cuts, falling prices, and layoffs.
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Home Owners Loan Corporation(HOLC)- provided government loans to homeowners who faced foreclosure because they couldn’t meet their loan payments. Created the Federal Housing Administration(FHA)- still in effect today
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New deal under attack By the end of the Hundreds Days millions of Americans had benefitted from the New Deal programs. Roosevelt had agreed to a policy of deficit spending The New Deal did not end the Great Depression and opposition grew among some parts of the population
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Conservatives argued that the New Deal policies such as the (AAA) and the (NIRA) gave the federal government too much control over agriculture and industry. Many believed The New Deal interfered with the workings of a free-market
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The Supreme Court Reacts 1935 – the supreme court decided that the NIRA was unconstitutional, they claimed it gave legislative powers to the executive branch 1936 – the supreme court struck down the (AAA) stating that agriculture was a local matter that should be regulated by the states rather than by the federal government.
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“court packing bill” – would enable FDR to appoint 6 new supreme court justices Despite the uproar FDR was able to appoint 7 new justices after an elderly justice retired and the democrats controlled the court.
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Liberty League 1934- strong conservatives banded together to create an organization called the American Liberty League Opposed the New Deal and believed it violated the rights of individuals and property. The three toughest critics were, Charles Coughlin, Dr. Francis Townsend, and Huey Long.
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The most serious challenge came from Huey Long, a senator from Louisiana. Wanted presidency himself, proposed “Share our wealth” program where he promised everyone something.
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The Second New Deal By 1935 the Roosevelt administration was looking for ways to build off of the first hundred days programs. The economy had improved in his first two years but unemployment remained high and production still lagged behind the levels of the 1920’s
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Despite this the New Deal enjoyed widespread popularity Roosevelt then introduced the second new deal or the Second Hundreds Days This second burst of activity focused on relief for farmers and workers
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Eleanor Roosevelt Eleanor was a social reformer who combined her humanitarian impulses with great political skill. Traveled the country observing conditions and reminding the president of the suffering country Urged him to appoint women to gov positions
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Helping farmers In the mid 1930’s 2/5 of farmers were mortgaged and thousands of farmers lost their homes Soil Conservation and Domestic Allotment Act- paid farmers for cutting production of soil-depleting crops and rewarded them for practicing good soil conservation methods. (replaced AAA) 1935- Resettlement Administration- provided monetary loans to small farmers to buy land.
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Works Progress Administration- harry Hopkins, former chief of the Federal Emergency Relief Administration WPA set out to create as many jobs as possible as fast as possible Between 1935-1943 it spent $11 billion to give jobs to more than 8 million workers, most of them unskilled.
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National Youth Administration- objective was to provide education, jobs, counseling, and recreation for youth. NYA provided student aid to high school, college, and graduates, in exchange students worked in part time positions at their schools.
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Improving labor and other reforms National Labor Relations Act (Wagner act) – reestablished the NIRA provision of collective bargaining. The gov protected the right of workers to join unions Also prohibited unfair labor practices Setup the creation of the National Labor Relations Board (NLRB) 1938- Fair Labor Standards Act
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Social security Social Security Act- created by Frances Perkins, most important achievement of the New Deal Three major parts 1. Old age insurance for retirees 65+ and their spouses 2. unemployment compensation system 3. aid to families with dependent children and people with disabilities.
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Second new deal also included laws to promote rural electrification and to regulate public utilities. By 1935 only 12.6% of American farmers had electricity Roosevelt established the Rural Electrification Administration (REA) -financed and worked with electrical cooperatives to bring electricity to rural areas. By 1945 48% of America’s farms had electricity. By 1949 90% had electricity
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