Great Depression & the New Deal

1. Great Depression & the New Deal

2. Boom to Bust • Most Americans believed the economic prosperity of the 1920s would last forever because: • Companies were producing 50% more from the beginning to the end of the decade • National income had grown from $64 billion to $87 billion • Most major corporations were making large profits • Everyone was making money in the Stock Market

3. Boom to Bust • What happened? • Warning signs of economic trouble were missed or ignored including: • Excessive buying with credit created superficial prosperity • Iron, railroad, & automobile industries weren’t as prosperous • Farms nationwide were suffering heavy losses

4. Election of 1928 • Herbert C. Hoover became the 31st U.S. President • In his inaugural address, Hoover pointed to future prosperity for the American people. • “We in America are nearer to the final triumph over poverty than ever before.”

5. Stock Market Crash of 1929 • Throughout the 1920s, stock prices rose steadily • In order to take advantage of this “bull market”, Americans rushed to buy stocks & bonds in an attempt to “get rich quick” • Because most Americans were “buying on margin” the rising stock prices did not reflect a companies’ actual worth • If stock prices declined, where would they get the money to pay off their loans?

6. Stock Market Crash of 1929 • In early September 1929, stock prices started a steady decline causing some investors to sell their stocks • On October 21 and 23 major declines hit the stock market followed by temporary recoveries • The 2nd recovery was engineered by JP Morgan and Company and other big name bankers. • This bailout conspicuously (noticeably) bought up stocks to gain people’s confidence • On Black Thursday October 24th panic selling hit the New York Stock Exchange as stock prices plunged & investors sold quickly

7. Stock Market Crash of 1929 • On Black Tuesday October 29th confidence in the market completely shattered as over 16 million stock shares were sold • Investors that had bought stocks on credit were stuck with huge debts & others lost all savings

8. Economic Collapse • The Crash signified the start of the Great Depression • The Crash led to bank closings & business failures. • Many Americans attempted to withdraw their savings from banks, but some couldn’t because many banks had also invested in the stock market.

9. “Brother Can You Spare a Dime”

10. Fact or Fiction? • Many people believe the Great Depression began with, or was caused by the stock market crash • Is this true? “ The stock market crash of 1929 did not so much cause the Depression, then, as help trigger a chain of events that exposed longstanding weaknesses in the American economy.” (page 662)

11. Causes of the Great Depression • End of “easy money” in the US • In the 1920s, Americans made & spent money with ease, businesses earned large profits, & investors received substantial dividends, but this prosperity eventually ended • Mal-Distribution of Wealth • In the1920’s, a decade of economic growth occurred but more than 50 % of American families were below minimum subsistence levels. Industrial and agricultural production increased but workers and farmers were not sharing in the profits. Not enough people could afford the numerous goods being produced.

12. Causes of the Great Depression • As a result construction, auto, coal, and other industries found decreased demand. Employees were laid off, which led to even less purchasing power. • In many expanding industries technology replaced the need for workers. In 1929 it became difficult for these workers to find more jobs as the economy slowed. • Excessive borrowing of money– Most Americans bought goods & stocks on credit with the expectation that it would be easy to repay their debts

13. Causes of the Great Depression • High tariffs had a negative affect on world trade • High tariffs prevented other countries from selling their goods in the U.S., in turn preventing them from securing the money needed to buy American products • Credit structure of the economy • Farmers were in debt. Crop prices too low to allow them to pay off their mortgages. Small banks especially those involved in this industry were struggling. • Some of or country’s biggest banks were investing recklessly in the stock market & making unwise loans.

14. Causes of the Great Depression

15. Life during the Depression • Cities • People lost their jobs & were evicted from their homes • Shantytowns, soup kitchens, & bread lines became common • Unemployment rates rose especially among African & Mexican Americans

16. Life during the Depression • Rural Areas • Thousands of farmers lost their land & turned to tenant farming in order to survive • Dust Bowl • Due to over-plowing the protective layer of prairie grasses was removed allowing winds to carry dust hundreds of miles • Parts of Kansas, Oklahoma, Texas, New Mexico, & Colorado became known as the Dust Bowl as dust storms led to thousands of farmers & sharecroppers left their land behind.

17. The Dust Bowl "And then the dispossessed were drawn west- from Kansas, Oklahoma, Texas, New Mexico; from Nevada and Arkansas, families, tribes, dusted out, tractored out. Car-loads, caravans, homeless and hungry; twenty thousand and fifty thousand and a hundred thousand and two hundred thousand. They streamed over the mountains, hungry and restless - restless as ants, scurrying to find work to do - to lift, to push, to pull, to pick, to cut - anything, any burden to bear, for food. The kids are hungry. We got no place to live. Like ants scurrying for work, for food, and most of all for land." - John Steinbeck, The Grapes of Wrath, 1939

18. Dust Bowl

19. Dust Bowl

20. Dust Bowl

21. “Okies” • Thousands of families migrated to California and other states (usually conditions not much better) • Called “Okies” because many came from Oklahoma

22. President Hoover’s Efforts • After the Stock Market Crash, President Hoover tried to assure Americans that the economy was on solid ground • Despite some urging direct relief from the federal government, Hoover believed relief should be provided by individuals, charities, & local organizations • His response only frustrated those struggling as the depression grew worse

23. Troubles Worsen • Spring 1931- international financial panic • 1920’s European nations relied on U.S. banks for loans • After 1929 they could not receive these loans • “financial fabric of several European nations began to unravel (667)” • One of the Largest banks in Austria collapsed • U.S. economy quickly plummeted to new lows

24. Congress Responds • Congress met December 1931 • Conditions were desperately bad, causing Hoover to support a series of measures that would keep endangered banks afloat and protect homeowners from being foreclosure

25. Reconstruction Finance Corporation • Bill passed January 1932 • Formed the RFC-a government agency provided federal loans to troubled banks, railroads, etc. • Made $ available to local governments allowing them to support public works projects and relief efforts

26. RFC and Hoover • Early Hoover programs small scale • RFC-Large scale • 1932 budget-$1.5 billion dollars

27. Shortcomings of the RFC • Only lent to businesses with sufficient collateral • A lot of money went to Big corporations and banks • Only funded public works projects that would ultimately pay for themselves (ex: toll bridges) What is collateral? a borrower's pledge of specific property to a lender, to secure repayment of a loan

28. RFC • Did not have enough money to make a significant impact on the Depression • Did not spend all the money it had either • $300 million available for local relief efforts • RFC only lent out $30 million of that • $1.5 billion budget only lent out 20%

29. President Hoover’s Efforts • Despite some success from the Boulder Dam project (later renamed the Hoover Dam), President Hoover’s inaction led to him being unfairly blamed for the Depression • Shantytowns became known as “Hoovervilles” & the homeless wrapped themselves in newspaper known as “Hoover Blankets”

30. “Hoovervilles”

31. Bonus Army • Congress had promised World War I veterans bonuses to be paid in 1940. • Many veterans were jobless & homeless as a result of the depression & marched to Washington D.C. to ask Congress to pass a law granting the bonuses early. • With Hoover’s backing, the Senate voted down a bill that would provide the bonus

32. Bonus Army • After a few thousand veterans & their families remained to protest, General Douglas MacArthur decided to drive the Bonus Army out of Washington • The result was intimidation of veterans & their families including one death, which the public reacted to angrily

33. Question for Review Why was Hoover so unpopular with many Americans?

34. Election of 1932 • Franklin D. Roosevelt became the 32nd U.S. President by defeating Hoover • Roosevelt’s campaign focused on the depression. • Roosevelt promised that the federal government would “take action” by providing direct relief to combat the depression

35. FDR “Let me assert my firm belief that the only thing we have to fear is fear itself.”

36. A New Deal for the American People • FDR promised the American people he would provide relief, recovery, & reform to get the country out of the depression • Through his alphabet agencies, FDR was taking action