Great Depression The Beginning

Great Depression The United States economy seemed very strong by 1922, only four years after World War I, but by the beginning of the 1930s, the United States was in a deep economic depression. Why do you think this happened? As the worry of war decreased, people began buying many products.

Great Depression For example, demand for home appliances increased, and many Americans bought such products on credit. In addition, overseas orders for American products increased as war-ravaged countries purchased goods from the United States because their own factory systems were destroyed.

Great Depression Factories in the United States went into full production to meet this increased postwar demand, both domestic and foreign. As war-torn countries rebuilt their factories, they began cutting their orders to American factories, which in turn contributed to American factories’ laying off workers or shutting down when their inventories stopped selling.

Great Depression A long period of rising stock prices is known as a bull market Many investors bought stocks on margin, making small cash down payments Margin call, a demand by the broker for the investor to repay the loan immediately Speculation, bet on the market climbing and selling whatever stock they could to make money

Roots of the Great Depression Efficient machinery led to overproduction Uneven distribution of wealth added to the country’s problems. (5% of households earned 30% of the county’s income) Low consumption added to economic problems As sales decreased, workers were laid off, resulting in a chain reaction

Roots of the Great Depression Installment plan, paying a little at a time, left little money to purchase other goods Hawley-Smoot Tariff intensified the Depression by raising the tax on imports Americans purchased less from abroad, in return foreign corporations did not buy American exports. Federal reserve lowered interest rates instead of raising them, encouraging banks to make risky loans and business thinking economy was growing

Causes of the Great Depression Over speculation in the stock market Over borrowing Over production in factories and farms Uneven distribution of wealth Failure by the Federal Reserve to monitor banks High protective tariffs

Causes of the Depression Overproduction and low demand leads to employee layoffs Low wages reduce consumer buying power High tariffs restrict foreign demand for American goods (Hawley-Smoot Tariff) Unemployment reduces buying power further

Depression Black Tuesday, October 29, 1929, stock prices fell drastically (stocks lost $10-$15 billion in value) This stock market crash did not cause the depression, but it weakened the nation’s banks Because the government did not insure bank deposits, customers lost their money. $30 billion was lost, (roughly equal to the total wages earned by Americans in 1929), as stock prices had dropped by over 1/3.

The Impact of The Great Depression Unemployment increased Homelessness increased Workers became more militant Farmers lost their farms Workers migrated in search of jobs

The Depression Worsens Bread lines – people waited for free food Soup kitchens – private charities gave a free meal to the poor Many homeless built shacks in shantytowns, which they referred to as “Hoovervilles” because they blamed the president who had been inaugurated in March As crop prices fell, many farmers left their fields uncultivated

The Depression Worsens A drought in the Great Plains, beginning in 1932, caused the region to become a “Dust Bowl” Farmers lost their farms and many families moved to California hoping to find a better life To escape these hardships Americans turned to movies and radio programs These shows contained stories of triumph over adversity and visions of a better life

The Depression Worsens Movies like The Wizard of Oz, Gone with the Wind became popular Books were written about the depression, the most famous was The Grapes of Wrath by John Steinbeck. It was about an Oklahoma family fleeing the Dust Bowl to find a new life in California.

Promoting Recovery Public Works – government-financed building projects Hoover increased public works and asked the nation’s mayors and governors to do the same Hoover tried to persuade the Federal Reserve to put more currency into circulation, but they refused He set up the NCC (National Credit Corporation) creating a pool of money to rescue the banks, it was not enough to help

Promoting Recovery He set up the Reconstruction Finance Corporation to make loans to banks, railroads, and agricultural institutions, but the economy continued to decline He opposed the federal government’s participation in relief – money that went directly to very poor families He felt that was the responsibility of state and local governments

Franklin Delano Roosevelt “The only thing we have to fear is fear itself.” What did Roosevelt mean by this statement?

Roosevelt’s Approach to Solving the Problems of the Great Depression Relief: Programs such as the Works Progress Administration (WPA) provided direct payment to workers. Recovery: Programs such as the Agricultural Adjustment Administration (AAA) were developed to bring the nation out of the Depression. The Tennessee Valley Authority (TVA) was also established.

Roosevelt’s Approach to Solving the Problem of the Great Depression Reform: Programs such as the Federal Deposit Insurance Corporation (FDIC) were developed to prevent similar problems in the future. The Social Security Act provided retirement protection. deal#the-new-deal deal#the-new-deal

Roosevelt’s Hundred Days President FDR sent many bills to Congress Congress passed 15 major acts to help the economy, these programs made up the First New Deal The Securities and Exchange Commission (SEC) was created to regulate the stock market and prevent fraud The Glass-Steagall Act prohibited commercial banks from speculating on the stock market. It created the Federal Deposit Insurance Corporation (FDIC)

Managing Farms and Industry The FDIC provided government insurance for bank deposits up to a certain amount. It covered peoples savings in the banks from loss Agricultural Adjustment Administration (AAA) helped some farmers but mostly just the large commercial farmers who raised one crop The National Industrial Recovery Act suspended antitrust laws PWA – broke down long standing racial barriers in the construction trades. (Public Works Administration)

Spending and Relief Programs The Civilian Conservation Corps (CCC) gave unemployed men aged 18 to 25 the opportunity to work with the national forestry service They planted trees, fought fires, and built reservoirs. The most important aspect of Roosevelt’s New Deal was the change in the spirit of the American people. Their faith in America was restored.

Social Security Act The Social Security Act provided security for the elderly, unemployed workers, and other needy people It provided welfare payments to needy people, including those with disabilities and poor families with young dependent children It provided a monthly retirement benefit for people when they stopped working at age 65