For example, you could have bought a share in the Radio Corporation of America for $85 in 1928. One year later, in 1929, this share could sell for $549. 1920s Spending For much of the 1920s, the Stock Market was a bull market, or one with rising stock values. The Stock Market works by people buying a percentage of a company, this is known as buying a share. As a company becomes more affluent, or wealthy, stock shares rise in value from what someone once bought them at which results in a gain in investment.
People who bought stock on margin planned to sell their stocks at a higher price and use the money they made to pay back the loan and keep what remained as profit. This only works, however, if the stock prices continue to increase in value. A decrease, would mean a loss in investment and the inability to pay back the loan. To protect their investments, a broker could issue a margin call, demanding the investor repay the loan at once. 1920s Spending Because of the opportunity to make huge profits from small investments, many people were encouraged to buy stock. For those who could not afford to pay the full price of a stock share, buying on margin, or purchasing stocks on credit, or borrowed money, was available. You could borrow money for stocks from stockbrokers. These people would earn a commission on the sale and an interest on the loan.
On Tuesday, October 29 th, the Stock Market crashed. So many people wanted to sell their stocks and so few wanted to buy that stock prices collapsed. This day became known as Black Tuesday. Black Tuesday October 29 th, 1929 Stock Market prices peaked in the late summer of 1929 Prices then began to drop Frightened investors who had bought stock on margin rushed to sell their stocks in order to pay off their loans On Thursday, October 24 th, panic hit the stock market and within 3 hours, the market lost $11 billion in value The trend continued with prices dropping on the following Monday.
But the economy did not recover quickly from the downturn that began in 1929. Why? Causes of The Great Depression The business cycle refers to the up and down pattern the economy follows. When businesses produce more than they can sell, goods pile up. Businesses then cut back on their production and lay off workers. As time passes, an economy will tend to bounce backs. Consumers buy surplus goods, and companies increase production to meet the demand. More workers are hired and unemployment drops.
Causes of the Great Depression Uneven Distribution of Income Goods were being overproduced during the 1920s Many Americans had purchased high-cost items such as refrigerators and cars on installment plans Purchasers could make small down payments and pay the remainder of the item’s price in small monthly payments However, with these debts, many Americans aren’t spending money buying new items In 1929, only 5% of American households earned 30% of the nation’s income. Meanwhile, 2/3 rd of families earned less than $2,500 Slumps in sales caused many Americans to be laid off
Causes of the Great Depression Loss of Export Sales Many other countries faced recessions after WWI and could not afford to buy American- manufactured goods or crops In 1929, Hoover tried to encourage international trade However, conservative republicans wanted to protect American industry from foreign competition by raising tarrffs This resulted in the Hawley- Smoot Tariff Raised the tariffs rate to highest in American history Resulted in many countries also raising their tariffs and fewer American products being sold overseas
Causes of the Great Depression Mistakes by the Federal Reserve Instead of raising interest rates to curb excessive spending on the Stock Market, the Federal Reserve kept its rates very low during the 1920s Failure to raise interest rates resulted in the following By keeping rates low, member banks were encouraged to make risky loans Low interest rates led business leaders to think the economy was still expanding. As a result, they borrowed more money to expand production, leading to overproduction Once the Great Depression hit, the Federal Reserve raised interest rates which tightened credit.
Visual Literacy Who and what do you see? What message is this image trying to send?
The Bank Industry Collapse In December 1930, a merchant visits his local Bank of United States in the Bronx, New York. He asked the bank to dispose of his stock in the bank, or give him the cash value of his sold stocks. The bank’s reluctance to return the man’s money instills fear into the general public who fear banks do not have their money.
The Bank Industry Collapses By the next morning, Bank of United States has collapsed In the last 60 days on 1930, 600 banks shut down By 1933, there are 28 states without a single bank open Unemployment goes from 4 million in 1930 to 25 million in 1932
Those left homeless and unemployed by the Great Depression started forming and living in make-shifts cities known as Hoovervilles. President Herbert Hoover’s Reaction Opposed direct government assistance to individuals affected by the Great Depression Did not believe the federal government should be involved in such matters However, he did implement some programs, such as the Reconstruction Finance Corporation which loaned $1.2 billion to 5,000 different financial institutions.
American Reaction to Herbert Hoover Many Americans were angry with President Hoover for not aiding the citizens of his country in a time of need Many homeless and unemployed Americans began to wander around the country and became known as hobos. In 1932, the Bonus Army built a new Hooverville in Washington, DC. More than 17,000 people lived there, mostly composed of WWI Veterans and their families
The Bonus Army The Bonus Army had come to the capital to demand early payment of a military bonus that was scheduled to be paid in 1945. The government denied their request and all but 2,000 people returned home.
The Bonus Army President Hoover authorized General Douglas MacArthur to use U.S. troops to evict the Bonus Army MacArthur used force, including tear gas and tanks, to scatter the veterans Several veterans were killed The American public was outraged and this tarnished Hoover’s reputation
The Dust Bowl Farmers did not share in the prosperity of the 1920s, and the Great Depression only worsened their situation A severe drought hit the Mid West in the 1930s and made making a living very difficult Oklahoma, Texas, Colorado, Kansas were hit hardest
The Dust Bowl Top soil was plowed and used so repeatedly by generations of farmers, that the ground held no nutrients to sustain growth Accompanied by extended drought, static electricity caused high winds to pick top soil up and create great clouds of dust up to 10,000 feet high Many farmers packed up whatever they could fit in the family car or truck and drove to California to look for any kind of work they could find.
Americans Face Hard Times 1/4 th of workers were without jobs Large numbers of people were hungry and homeless.
Depression-Era Culture Entertainment became an escape for Americans to forget their worries. Movies and radio became very popular. During the 1930s, more than 60 million Americans went to the movies each week. During this time period, Shirley Temple and Walt Disney became popular movie figures. Movies such as Snow White and the Seven Dwarfs and The Wizard of Oz emerge during this time.
Depression-Era Culture Movies offered Americans an escape from reality See a movie for 25 center or less
Depression Era Culture While movies captured the imagination, radio brought information and entertainment to the home. Radio soap operas provided entertainment and radio adventures such as The Lone Ranger became popular.
Depression-Era Culture Writers and artists tried to portray life around them. John Steinbeck, author of The Grapes of Wrat h tells the story of the Joad family fleeing the Dust Bowl to find a new life in California after leaving their farm. Photographers such as Dorthea Lange produced photographs that demonstrated how the Great Depression had affected average-Americans.
Visual Literacy On a separate sheet of paper, answer the following questions: Who and what do you see in this picture? What do you believe the message of this picture is? (What is going on?)
Miss Ferrara Virginia and United States History THE GREAT DEPRESSION
Visual Literacy Who and what do you see? What message is this image trying to send?
1932 Presidential Election The Republicans ran Herbert Hoover as their candidate in the election The Democrats put up New York Governor Franklin D. Roosevelt Many Americans had begun to blame Hoover for the Great Depression
1932 Presidential Election Franklin D. Roosevelt was the Governor of New York Had previously served as a Senator and Assistant Secretary of the Navy Struck with Polio in 1921 and became wheelchair bound However, he hid this from public view by always standing behind podiums or using others to lean on to help support his weight
1932 Presidential Election Americans saw in Roosevelt an energy and optimism that gave them hope despite the tough economic times Roosevelt wins the Presidential Election in 1932 by a landslide, receiving the electoral vote in all but 6 states
The Hundred Days Immediately after Franklin Roosevelt took the office of President, he called Congress into a special session. It lasted from March 9 th to June 16 th, and became known as the Hundred Days. Roosevelt and Congress immediately got to work to create The New Deal 15 programs were created to aid economic recovery
The New Deal The New Deal was created to battle the Great Depression and aid economic recovery. Roosevelt’s first goal was to restore American confidence in banks. The day after Roosevelt’s inauguration, banks were closed for a “bank holiday” Three days later, Congress’ special session began and the passage of the E mergency B anking R elief A ct with President Roosevelt’s signature went into effect.
The New Deal That Sunday, President Roosevelt gave the first of many fireside chats. Roosevelt explained the EBRA The government would inspect the finances of every bank Only healthy banks would be permitted to reopen Prompted Americans to develop trust for banks again The next day, deposits into banks exceeded withdrawals
The New Deal Although Americans were again trusting the bank system, President Roosevelt wanted to ensure that banks and the stock market could be held accountable The F ederal D eposit I nsurance C orporation, ( FDIC ) provides government insurance for bank deposits up to $250,000 The S ecurities and E xchange C ommission ( SEC ) was formed to regulate the stock market and prevent fraud
The New Deal To help homeowners make their mortgage payments, the H ome O wners’ L oan C orporation, ( HOLC ) was created The HOLC bought the mortgages of many homeowners who were behind in their payments The mortgages were then restructured with longer terms of repayment and lower interest rates These loans were only given to homeowners who were not farm owners and were still employed If you were still unable to make payments, the HOLC foreclosed on your home just as a bank would have done
The New Deal The F arm C redit A dministration, ( FCA ) helped farmers refinance their mortgages so they could keep their farms The FCA lent 4 times as much money to farmers as the entire banking system had the year before
The New Deal The A gricultural A djustment A ct, ( AAA ) helped stabilize agricultural prices Prices for farm goods were low because farmers grew too much food The government paid farmers to not raise certain livestock and not grow certain crops Farmers slaughtered 6 million piglets and plowed under 10 million acres of cotton The program worked and the farm surplus fell sharply by 1936
The New Deal The N ational I ndustrial R ecovery A ct, ( NIRA ) addressed business concerns by eliminating unfair competition among companies. This law was passed with help from Secretary of Labor, Frances Perkins, the nation’s first woman cabinet member. Required businesses to have minimum wage and allow collective bargaining. The N ational R ecovery A dministration, ( NRA ) ran the entire program However, the program ruled hard to administer and regulate and the Supreme Court ruled it unconstitutional in 1935
The New Deal Congress established the F ederal E mergency R elief A ct ( FERA ) to fund state and local agencies to fund relief projects The P ublic W orks A dministration, ( PWA ) helped the 1/3 rd of unemployed Americans who were construction workers. Instead of hiring workers directly, the PWA awarded contracts to construction companies to build new highways, dams, sewer systems, and schools
The New Deal By the fall of 1933, neither FERA nor the PWA had reduced unemployment significantly The C ivil W orks A dministration ( CWA ) employed more than 4 million Americans who built roads and airports Unlike the FERA or PWA that funneled money to state and local agencies, the CWA hired people directly
The New Deal The C ivilian C onservation C orps ( CCC ) provided jobs for hundreds of thousands of people through projects such as planting trees and improving national parks The T ennessee V alley A uthority ( TVA ) hired people to build dams and generators, bringing electricity and jobs to rural communities in the Tennessee River valley
Criticism of the New Deal Some felt that the New Deal went too far Expansion of Government Thought the President had too much authority Businesses concerned that the high cost of new government programs would lead to new taxes
Criticism of the New Deal Some felt that the New Deal did not do enough US Senator Huey Long from Louisiana thought that the distribution of wealth should be shared among all Proposed the rich be taxed and use the money to guarantee every family had an income of at least $5,000. Father Charles Edward Coughlin was a Priest who wanted the government to nationalize, or take over, all of the country’s wealth and natural resources.
The Second New Deal With Democrats winning more seats in Congress in the election of 1934, Roosevelt continued to introduce more New Deal legislation With the end of the CWA in 1934, Congress formed a new agency: W orks P rogress A dministration, ( WPA ) in use from 1935 to 1943
The Second New Deal The WPA employed some 8.5 million people on tens of thousands of projects all over the country. More than 650,000 miles of roads 75,000 bridges built 8,000 parks created 800 airports founded
The Second New Deal President Roosevelt wanted to help those who were “unable…to maintain themselves independently, through no fault of their own.” The Social Security Act provided some financial security for the elderly, the disabled, children, and the unemployed To help pay for this, the law placed a new tax on workers and employers Marked first time the federal government took direct responsibility for many citizens
Labor Programs When the Supreme Court ruled the NRA unconstitutional, Congress passed the N ational L abor R elations A ct, ( NLRA ) Allowed workers to join labor unions and take part in collective bargaining Established the National Labor Relations Board to oversee union activities.
Labor Programs Unskilled workers, such as those who worked on assembly lines lacked union representation In 1935, the C ongress of I ndustrial O rganizations, ( CIO ) organized workers into unions based on industry, not skill level Unions proved powerful against businesses The CIO went on strike against General Motors on New Year’s Eve 1936. It lasted for 44 days and instead of leaving the buildings as strikers usually do, they stayed in the factories so they could not be replaced by new workers. This became known as the sit-down-strike
Miss Ferrara Virginia and United States History THE GREAT DEPRESSION
THE NEW DEAL http://www.youtube.com/watch?v=WvcWeNf9g6A
Clashes with the Court In 1935, the Supreme Court issued a series of rulings declaring several New Deal programs unconstitutional Feeling threatened, Roosevelt proposed a plan to Congress that would allow the president to appoint a new Supreme Court justice for every justice who was 70 years old or older. Roosevelt would have been able to appoint 6 new justices immediately The plan did not pass through Congress, but the Supreme Court did not overturn any more New Deal legislation
The Tennessee Valley Authority Affected 7 states Tennessee, Virginia, North Carolina, Georgia, Alabama, Mississippi, and Kentucky Harnessed the power of the Tennessee River and others nearby to produce hydro-electricity
Recession of 1937 Early and mid-1937 saw production levels close to pre-Depression levels By late 1937, unemployment once again soared Due to Roosevelt trying to balance the budget Roosevelt cut spending on the WPA and PWA just as Social Security took effect, removing $2 billion from the economy Left 2 million unemployed once again
Recession of 1937 John Keynes believed the government should spend heavily in a recession, even if it required deficit spending to jump start the economy Henry Morgenthau, Treasury Secretary, favored balancing the budget and cutting spending Roosevelt was hesitant to begin spending again, but began to do so again in 1938 by refunding the WPA and PWA
Legacy of the New Deal The New Deal was limited in its success Unemployment remained high and the economy had not completely recovered Many sight the New Deal and Great Depression as the beginning of “big government”
Legacy of the New Deal In the end, the New Deal did not end the Great Depression However, the New Deal greatly expanded the role of the federal government. Programs such as Social Security and the Federal Deposit Insurance Corporation remain today What will finally end the Great Depression?
Why were bread lines like these common throughout the United States during the Great Depression? How does the clothing on these men indicate that the Depression was wide- reaching? PRIMARY SOURCE ANALYSIS
Why is this 15 year old girl writing Mrs. Roosevelt? Based on this letter, how did the Depression affect children? Dear Mrs. Roosevelt, I m now 15 years old and in the 10 th grade. I have always been smart but I never had a chance as all of us is so poor. I hope to complete my education but I will have to quit school I guess if there is no clothes that can be bought. Mrs. Roosevelt, don’t think I am just begging, but that is all you can call it I guess. Do you have any old clothed you have throwed back? You don’t realize how honored I would feel to be wearing your clothes. I will close now as it is about mail time. I hope to hear from you soon. (and real soon) Your friend, M. I. PRIMARY SOURCE ANALYSIS
EXIT CARD Name 3 states the TVA served What did John Keynes think the government should do during a recession? What is the lasting legacy of the New Deal? What ends the Great Depression?