Lesson 30. Whatdunnit? The Great Depression Mystery. (16) Economics. The student understands significant economic developments between World War I and World War II. The student is expected to:
(16) Economics. The student understands significant economic developments between World War I and World War II. The student is expected to:
(A) analyze causes of economic growth and prosperity in the 1920s, including Warren Harding's Return to Normalcy, reduced taxes, and increased production efficiencies;
(B) identify the causes of the Great Depression, including the impact of tariffs on world trade, stock market speculation, bank failures, and the monetary policy of the Federal Reserve System;
(C) analyze the effects of the Great Depression on the U.S. economy and society such as widespread unemployment and deportation and repatriation of people of European and Mexican heritage and others;
(D) compare the New Deal policies and its opponents' approaches to resolving the economic effects of the Great Depression; and
(E) describe how various New Deal agencies and programs, including the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Social Security Administration, continue to affect the lives of U.S. citizens.History TEKS:
Normally, people start buying again as automobiles wear out and incomes improve.
Politicians kept promising that “prosperity was just around the corner.”
Business activity continued to decline and unemployment stood at 28% in March, 1933.1929-1933
A multiplier effect comes into play when workers who lose jobs spend less and cause others to lose jobs.
A rise in bank failures led to a significant reduction in the amount of money available to buy good and services.
The Federal Reserve, founded in 1913, hesitated to loan to banks considered “unsound.” They allowed them to fail.
Remember that pre-FDIC, when the bank failed, depositors lost funds.
Current perspective: 140 banks failed in 2009, 157 in 2010 and 11 so far this year.
The FED raised interest rates, contracting the money supply.
With less money circulating, fewer goods and services were bought and more people became unemployed.
When interest rates increased, the bonds held by the banks lost value.
*Currency plus bank deposits, in billions of dollars.
The world financial system that emerged after World War I was based upon the gold standard.
The United States and Great Britain guaranteed that they would exchange their currencies for gold at a fixed rate ($20.67) for an ounce of gold.Activity 30.3 What Would You Have Done?
(This information in on page 324 of the Focus: Understanding Economics in United States History book, Lesson #27 – Free Silver or a Cross of Gold:)
(15) Economics. The student understands domestic and foreign issues related to U.S. economic growth from the 1870s to 1920. The student is expected to:
(A) describe how the economic impact of the Transcontinental Railroad and the Homestead Act contributed to the close of the frontier in the late 19th century;
(B) describe the changing relationship between the federal government and private business, including the costs and benefits of laissez-faire, anti-trust acts, the Interstate Commerce Act, and the Pure Food and Drug Act;
(C) explain how foreign policies affected economic issues such as the Chinese Exclusion Act of 1882, the Open Door Policy, Dollar Diplomacy, and immigration quotas;
(D) describe the economic effects of international military conflicts, including the Spanish-American War and World War I, on the United States; and
(E) describe the emergence of monetary policy in the United States, including the Federal Reserve Act of 1913 and the shifting trend from a gold standard to fiat money.History TEKS:
1. The world financial system that emerged after World War I was based upon the gold standard. The United States and Great Britain guaranteed that they would exchange their currencies for gold at a fixed rate ($20.67) for an ounce of gold.
2. The Federal Reserve lowered interest rates after a time, but in 1930 and 1931, when the American economy had already taken a downturn, more bank runs occurred in many countries, and again gold flowed out of the United States.
One of the New Deal reforms was taking the U.S. off the gold standard.
Activity 28.1 in Lesson 28 (p. 333) is a play which allows students to understand how runs on banks happen.
Lesson 28 is Money Panics and the Establishment of the Federal Reserve System
4. In 1932 Congress creates the Reconstruction Finance Corporation (RFC), which lends money to businesses that are in trouble, including banks.
The FDIC was created to insure deposits as one of the New Deal reforms.
The Federal Reserve for not really being the lender of last resort to the banks?
The fact that the world was on a Gold Standard?
A banking system with no “FDIC equivalent”?
A President who raised taxes in the middle of the problems to “balance the budget”?
A Congress who passed the Smoot-Hawley Tariff Act in 1930 and nearly killed trade?Whatdunnit: The Great Depression Mystery
Each part of the country also has a unique history related to the 1920s and 1930s.
Teaching state history or local history helps students make the historical connections to the Great Depression.
Here is an example from the Texas Panhandle.Making the historical connections:
In the 1920’s, automobiles became commonly owned by families, and there was a clamor for better roads.
Dalhart reported black dusters in 1934.
March 3, 1935, was the first black duster in Amarillo.
April 14, 1935, was the “granddaddy of them all.”
Poor agricultural practices and years of sustained drought caused the Dust Bowl, which lasted about a decade.
The birds were the first sign.
The wind had picked up from the north…riding the wind were hundreds, and then thousands, of birds headed south as if it were fall, not spring.
On the horizon to the northeast, a thick strip of darkness appeared as if a storm were approaching. But there were no flashes of lightning or thunder. Silently, the darkness loomed higher and closer. Great, billowing clouds of dirt suddenly bore down on the city.
Soon, the city was plunged into darkness as the dust storm swept through at more than 50 miles an hour.
. . . Historic Amarillo by Mike Cox
These iconic pictures reflect the struggles of the families who left the Dust Bowl behind, heading west to find new hope in California. Between 1935 and 1940, the number of farms in the Panhandle declined by nearly 25%.
In his 1939 novel, The Grapes of Wrath, and the movie made in 1940, John Steinbeck immortalized Route 66.
“And then the dispossessed were drawn west . . . car-loads, caravans, homeless and hungry; twenty thousand and fifty thousand and a hundred thousand and two hundred thousand. . . .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
Lesson 31, on page 363, entitled “Did the New Deal Help or Harm the Recovery?” gets into the specifics of governmental efforts to recover from the Great Depression.Teaching about the great depression
The St. Louis Federal Reserve Bank has a 6 lesson teaching curriculum on the Great Depression which can easily be downloaded from their website at stlouisfed.org .