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THE GREAT DEPRESSION AND NEW DEAL. THE ELECTION OF 1928. THE CANDIDATES. THEN CAMPAIGN OF 1928. THE RESULTS. HERBERT HOOVER. Organized food drives for the starving people of Belgium during WWI. Led the Food Administration Board during WWI.
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HERBERT HOOVER Organized food drives for the starving people of Belgium during WWI. Led the Food Administration Board during WWI. Successful businessman who hated socialism or large-scale federal govt., intervention in the economy.
HERBERT HOOVER As Sec. of Commerce, he supported some progressive ideas e.g., endorsing labor unions and supporting federal regulation of the new radio broadcasting industry. Claimed in 1928 that “Poverty will be banished from the nation. Everybody ought to be rich.” He is an accident of history.
THE GREAT CRASH OF 1929 The ever-rising stock prices had become both a symbol and a source of wealth during the 1920s. A “boom” was in full force in the USA and in the world economy in the late Twenties. On the Wall Street Stock exchange, stock prices kept rising for 18 months – 3/28-9/29. 9/3/29: The Dow Jones Average of major stocks had reached an all-time high of 381. An avg., investor who bought $1,000 worth of stocks at the time of Hoover’s election would have doubled his/her money in less than a year. Millions invested in the boom market of 1928.
THE GREAT CRASH OF 1929 Millions lost their money in October 1929, when the boom market collapsed.
IMMEDIATE CAUSES OF THE GREAT CRASH OF 1929 1. The Bull Market 2. Buying stocks on margin. 3. Overspeculation.
THE GREAT CRASH OF 1929 Although stock prices had fluctuated greatly for weeks preceding the crash, the true panic did not begin until Thursday Oct. 24, 1929. Black Thursday: Saw an unprecedented volume of selling stocks and prices plunged.
THE GREAT CRASH OF 1929 Hoping to starve off disaster, a group of bankers bought millions of dollars of stocks in an effort to stabilize prices. This worked for one business day – Friday. The selling frenzy resumed on Monday Oct. 28, 1929.
BLACK TUESAY: OCTOBER 29, 1929 Oct. 29, 1929: Black Tuesday: everybody wanted to sell their stocks. Investors ordered their stock brokers to sell when there were no buyers to be found. Within hours, the stock market crashed.
BLACK TUESDAY: OCTOBER 29, 1929 From that day on, prices on Wall Street kept going down and down. By mid-November, $25 billion in stock value had disappeared. Fortunes were wiped out almost overnight.
THE GREAT CRASH OF 1929 Traditional historical interpretation puts the Crash as the immediate cause of the Great Depression. However no direct connection has ever been proven. The US did not sink into a major depression until Dec. 1930.
LONG-TERM CAUSES OF THE GREAT DEPRESSION 1. Weak Industries 2. Overproduction of consumer goods. 3. Uneven distribution of income. 4. Unstable banking system. 5. Stock market speculation. 6. Excessive use of credit. 7. Weak farm economy. 8. Government policies. 9. Global economic problems.
EFFECTS OF THE GREAT DEPRESSION The Great Depression was the longest and most devastating in US history. USA hit the hardest among industrialized nations. GNP fell from $104 billion in 1929 to $56.1 billion in 1933.
HOOVER’S RESPONSE TO THE GREAT DEPRESSION • Hoover believed that outside forces in Europe were responsible for the Great Depression: • International reparations and war debts structure collapsed. • Post-war military alliances and doubling of war armaments. • Unbalanced budgets and increasing debt.
FARMING 1929: Agricultural Marketing Act. 1930: Federal Farm Board. Harley-Smoot Tariff of 1930.
ECONOMIC RECOVERY Hoover believed voluntary cooperation would enable the country to overcome the Depression. He urged businesses to avoid lay-offs and wage cuts. He urged all citizens to contribute to charities to ease the suffering. But private charity was not enough to meet the country needs.
RELIEF FOR THE NEEDY Hoover refused to support public relief programs. He vetoed use of federal funds for relief for the needy. He believed that govt., handouts would destroy the nation’s work-ethic. He compromised by authorizing the RFC to lend $300 million to states for relief.
HOOVER: AN ASSESSMENT Advocated more direct govt., involvement than any previous president. Probably prevented a more serious collapse than did occur. Policies paved the way for the New Deal. His conservatism prevented him from going far enough to solve the worst slump in US history.
FRANKLIN DELANO ROOSEVELT FDR born into privilege but he would become to be beloved as the symbolic representative of ordinary citizens. His greatness lay in his willingness to do new and bold things to confront a national crisis. In his Democratic nomination acceptance speech, he promised a “new deal” for all Americans. But his campaign offered only vague hints of what a “new deal” might entail.
FRANKLIN DELANO ROOSEVELT He spoke of the govt.’s, responsibility to guarantee “every man … a right to make a comfortable living.” Yet he advocated a balanced federal budget and criticized Hoover for excessive govt., spending.
THE COMING OF THE NEW DEAL FDR conceived of the New Deal as an alternative to socialism on the left, Nazism on the right, and the inaction of upholders of unregulated capitalism. He hope to reconcile democracy, individual liberty, and economic planning. FDR did not enter office with a blueprint for dealing with the Great Depression. The New Deal was an attempt to preserve capitalism. FDR relied heavily for advice on a group of intellectuals and social workers who took up key positions in his administration.
THE NEW DEAL PHILOSOPHY In his First Inaugural address, FDR declared “the only thing we have to fear is fear itself.” During the campaign he had promised to help the “forgotten man at the bottom of the economic pyramid.” • During the early years of his presidency, it became clear that his New Deal programs were to serve three R’s: • Relief for the people out of work. • Recovery for business and the economy as a whole. • Reform of American economic institutions.
THE BANKING CRISIS FDR confronted a banking system on the verge of collapse. As bank funds invested in the stock market lost their value and panicked depositors withdrew their money, bank after bank had closed its doors. 1933: Over 5,000 banks had failed. To restore confidence in those banks still solvent, FDR declared a “bank holiday” temporarily halting all bank operations, and called Congress into special sesssion.
THE BANKING CRISIS • FDR and Congress responded with the following: • Emergency Banking Act • Glass-Steagall Act • Federal Deposit Insurance Corporation
THE BANKING CRISIS FDR took the USA off the gold standard thus making possible the issuance of more money in the hope of stimulating business activity. These measures rescued the financial system and greatly increased the govt,s., power over it. In 1936, not a single bank failed.
