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The Crash, The Great Depression, & The New Deal

The Crash, The Great Depression, & The New Deal. What is a Depression???. Discussion A lengthy period (At Least 2 Years) of economic weakness with these characteristics: High Unemployment Rates Tightening Credit from Banks Weak Performance by the Stock Market

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The Crash, The Great Depression, & The New Deal

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  1. The Crash, The Great Depression, & The New Deal

  2. What is a Depression??? • Discussion • A lengthy period (At Least 2 Years) of economic weakness with these characteristics: • High Unemployment Rates • Tightening Credit from Banks • Weak Performance by the Stock Market • Difficulty for Consumers to Purchase Goods/Services

  3. Explain the irony in this Great Depression Era photograph.

  4. The Crash • The 1920's saw America’s economy grow tremendously. • Then, onTuesday, October 29th, 1929, The Jazz Age ended. The NY Stock Exchange crashed on Black Tuesday, causing a depression that lasted until 1942.

  5. How does the Stock Market work??? • When you buy groceries you could buy items separately, but it would take too much time and money. • Butcher – Meat, Farmer’s Market – Vegetables, etc. • We don’t do this. We go to a Supermarket instead. It’s great because you can buy all types of food at one place. • The Stock Market works the same way. Instead of visiting the office of every company you want to buy stock (ownership) from, you can purchase ownership in many companies from one place.

  6. How do you make money in the Stock Market??? • Companies sell stock to raise money to run their businesses. • People buy stock so that they can resell it later at a higher price. When companies grow and make more profit, they are worth more money. • Owning stock means owning a share of that company. When you buy stock, you become a "shareholder" in a company. As the company earns money, so do you; because you own a share of the company, your share goes up in value with the value of the company. • But, this is a gamble! If the value goes down you won’t be able to sell the stock for the amount purchased. The value of 1 share of stock is constantly changing as people buy and sell shares in different companies.

  7. There were several Warning Signs of trouble in the U.S. economy during the 1920’s: • Because of the booming 1920's economy, $ was plentiful, so banks were quick to make loans to stock market investors • This was called BUYING ON MARGIN – borrowing money to purchase stocks • This was true for consumers too. PERSONAL DEBT - was at an all time high. People were borrowing too much money. • Overproduction • Farms grew too many crops, which caused prices to fall sharply. • Factoriesproduced too many new goods, which caused them to lose profit.

  8. How did the Stock Market CRASH? • Businesses and farms overproduce because of new technology. • Stock prices fall when these businesses suffer. Many of them close. • When the stock prices fall, this causes investors to lose money. • Many of these investors can’t pay back their loans to the bank. (They Bought on Margin!) • When banks don’t get their loan payments, they evict. • Investors sell off their remaining shares to try and pay back what they can. • The false sense of security Americans had in their economy was OVER.

  9. The market collapses due to panic selling (everyone selling stocks with very few buyers)= BLACK TUESDAY • More people lose their jobs b/c companies whose stock has no value have to close. • There is no money to operate their business. • Middle Class • Banks close because they run out of money. No one can afford to pay back their loans. How long has it been since an American bank failed???

  10. Take a Break: What was the average life expectancy of a U.S. citizen during the 1930’s? • 60 years old • 33 years old • 70 years old • 82 years old • A. 60 years old • 2010 US Life Expectancy: 78.3 (#36) • 75.6 – Male, 80.8 – Female

  11. Which of these famous stories caused a nation-wide panic among 6 Million U.S. radio listeners on 10/31/1938? • 20,000 Leagues Under the Sea • War of the Worlds • Sleepy Hollow • King Kong • B. War of the Worlds

  12. What is Buying on Margin? • Borrowing money to purchase Gold. • Borrowing money to purchase School Buildings. • Borrowing money to Gamble. • Borrowing money to purchase Stocks. • D. Borrowing money to purchase Stocks.

  13. BELLRINGER: • Clear your desks! • We are going to find out how well you remember our notes from Monday.

  14. The Depression Takes Its Toll • Homework assignment – Daily Grade • It is absurd to think that the man still has enough hope to walk around with his lunchbox • The workers are weak and taken advantage of by the wealthy. • Anger and frustration • Ragged, pale, anemic, lean, sickly.

  15. Review: The Depression is Coming. • Between 1924-27, U.S. productive capacity doubled but it was b/c of technological innovation  electricity and mechanical advances made for better production, but no new jobs were added to the economy Consumer Debt grew at an alarming rate. • So more consumer goods were available, but there weren't really more people to buy them (OVERPRODUCTION) • Farmers Overproduced their crops, which made prices fall dramatically and caused them to default on their loan payments. • Also, stock market investors Bought Stocks On Margin. And when the stock market dropped drastically, they lost their borrowed money, yet still owed payments to their bank.

  16. Another Problem… The Dust Bowl • Massive drought and dust storms in the Great Plains during the 1930s • Due to poor farming practices, and… • Drought that lasted for years • Dust storms blacked out EVERYTHING!

  17. “Okies” – Great Plains farmers who lost everything, packed their belongings into their Ford, and traveled West to California for a job • The dust storms were so large the clouds carried the debris thousands of miles • Red Snow in Boston and New York • Oklahoma lost 15% of its total population • Dorothea Lange - photos

  18. President Herbert Hoover responds… • He didn't believe that the govt should play an active role in sustaining the economy • Hoover believed in VOLUNTEERISM. Charity would help Americans through the Depression until the economy came back. • DON’T USE THEGOVT TO CONTROL THE ECONOMY. It wouldn’t end the Depression and would make life worse because: • It would kill American work ethic • It would give the Govt too much power

  19. In early 1931, these measures appeared successful, but then......the TARIFF WARS • Hoover teamed up with the Democrats in Congress to pass a high tariff (SMOOT- HAWLEY TARIFF) to protect U.S. industry (hoped to stimulate purchasing of U.S. goods) • This turned out to be a fatal error... • Congress did not understand that the world had become a GLOBAL ECONOMY • Other countries retaliated by passing high tariffs. No foreign markets purchased American goods, so U.S. productivity decreased AGAIN.

  20. Americans React to Hoover • Hoover was increasingly unpopular, but he continued to try... He changed his philosophy and persuaded Congress to establish the govt run loan agency called THE RECONSTRUCTION FINANCE CORPORATION (RFC) • It had the power to make emergency loans to banks and other large businesses • but it was too little too late… • And, Hoover wouldn't involve himself in any programs of direct govt aid to individuals.

  21. Hoover also approved the construction of some Public Works projects. (Govt construction jobs) • The best example of this was the World’s largest hydroelectric dam, the Hoover Dam. • These projects did help some, but they did not put enough people to work to end the depression.

  22. People were frustrated - isolated protest movements • EX: Dairy farmers frustrated w/low price of milk refuse to sell (dump it) • EX: WW1 veterans “BONUS ARMY” (pensions discontinued by congress) march on Washington = BONUS MARCH. They reached Washington by 1931, set up Shantytowns (HOOVERVILLES) Food scraps = HOOVER-MEALS & Hitchhiking journeys = HOOVER RIDES • After one year they were forcibly removed by the Army (MacArthur/Eisenhower)

  23. Election of 1932 • 1 out of 4 Americans were unemployed… • Avg Income dropped 50% from the 1929 avg • Republicans nominated Hoover  NO HOPE • Democrat FRANKLIN DELANO ROOSEVELT, the Governor of NY, won in a Landslide

  24. FDR • TR’s 5th Cousin, diagnosed with polio 1921, Eleanor Roosevelt – 1st First Lady to take an active political role • Harvard Educated, Former Gov and US Senator from New York. • Government: Believed MASSIVE Amounts of govt aid would solve the problem. • New Deal – Government funded programs to lower unemployment • Brain trust – Ivy League economics professors that advised FDR on the economy “We have nothing to fear, but fear itself.”

  25. Fireside Chats - FDR restored Americans’ confidence in the banking system, and his New Deal by making regular radio addresses • Series of 30 evening radio speeches given between 1933 and 1944. • 1st radio addresses made by a President. • FDR seemed much more compassionate than Hoover.

  26. Alphabet Soup – list of New Deal programs passed by FDR and the Democrats during the 1930s • US Supreme Court: After some major New Deal programs were ruled Unconstitutional, FDR wanted to add new justices to the court who would agree with his New Deal. This “Court Packing Scheme” was not allowed. There was no guarantee that New Deal programs would solve the country's economic problems, but many took a chance on FDR and hoped that programs like the CCC, WPA and NRA would help.

  27. Which board game became popular during the Great Depression? • Sorry! • Monopoly • Candy Land • Scrabble • B. Monopoly – Probably because people could get rich quick while playing it. (At least in their imagination)

  28. In 1933, there were 25,000 banks in the USA. How many of them had failed by this date? • 380 • 985 • 3,329 • 11,000 • D. 11,000 banks closed their doors. Almost half of all the country’s banks.

  29. REVIEW: Members of the Women's Christian Temperance Union were MOST interested in promoting… • An 8 Hour Workday for child laborers • Women’s Suffrage • Prohibition of alcohol in the U.S. • Rapid assimilation of all new immigrants • C. Prohibition of Alcohol in the U.S.

  30. BELLRINGER • Souper Bowl Competition • What is Social Security? • Where does the money come from?

  31. The New Deal • This was the name FDR gave to his new program to fight the Depression • It was a revolutionin American society - completely changed the way the govt functions. • The 1st New Deal dealt exclusively w/ economic reform - unlike Hoover, FDR believed govt legislation, aid $$ & involvement was crucial to stimulate the economy • STEP 1 – Ending the banking crisis - The FDIC – Federal Deposit Insurance Corporation – is created to provide govt insurance for bank deposits. A BANK HOLIDAY was declared - banks were shut down and subject to govt inspection, allowed to reopen when "healthy"

  32. STEP 2 - Stock market reform - The Securities & Exchange Commission (SEC)was est. to police stock markets. The practice of Buying on Margin was regulated • STEP 3 - to increase circulation, FDR ended the GOLD STANDARD (the govt could now print more $ than the Fort Knox gold reserves held)= More $ in circulation, wages and prices increased = inflation, causing dollar value to lower- gave govt spending power

  33. FDR's New Deal was not widely accepted. Many Americans felt that they were being dealt a bad hand and that the government was experimenting in Socialism. • What do you think??? • Does our government have TOO MUCH power? • Was HOOVER or FDR right??? • Were they both wrong? • Lets Vote! Which philosophy would you vote for today? HOOVER vs. FDR

  34. “Alphabet Soup”- FDR’s group of laws to help the economy • NATIONAL INDUSTRIAL RECOVERY ACT (NIRA) and NATIONAL RECOVERY ADMIN (NRA)established labor codes which dictated how businesses could operate business people challenged the NRA, claiming it was communist. • These 2 agencies were the key pieces to FDR’s New Deal. • They formed the LIBERTY LEAGUE - at LL's urging, the U.S. Supreme Court overturned the NIRA & NRA, claiming that fed. govt was exceeding its authority (by interfering in state jurisdiction)

  35. TVA – TENNESSEE VALLEY AUTHORITY - used to promote hydroelectric power, control flooding - lower rates  private industry vs. federal govt ownership

  36. FDR, like Hoover, was wary of govt handouts - he wanted people to earn their keep so govt agencies were created - temporarily - to address the unemployment problem • CCC – CIVILIAN CONSERVATION CORPS - in 1933 - set to establish work for young men (18-25) in areas of reforestation, soil conservation, flood control, road construction - also took them out of urban labor markets - but Blacks not permitted to enroll

  37. AAA – AGRUCULTURAL ADJUSTMENT ACT - passed in 1933 to aid farmers- its objective was to restore farmers' purchasing power and to restore the family farm - AAA had farmers cut back on crop production by paying them equivalent SUBSIDIES (paid not to produce) - bad side: • 1) food production down when millions were starving • 2) Black sharecroppers were hurt: white landowners paid not to farm so they got rid of Black tenant formers • in 1935, AAA was declared unconstitutional by courts (too much control over individual states), so it was revised and introduced as new legislation

  38. Other agencies had specific mandates too...NATIONAL YOUTH ADMIN. (NYA) - created jobs for young people in urban areas • 21st Amendment – Repealed the 18th Amendment – Ended Prohibition • Welfare Capitalism also became more popular as wages were cut during the 1930’s and 1940’s. This is when businesses would provide welfare-like services to its employees: Health Insurance, Unemployment Insurance, Paid vacations

  39. But, Unemployment was STILL a major problem… Coolidge Hoover FDR (13 Years) Truman

  40. The 2nd NEW DEAL – RECOVERY – SOCIAL REFORMS - after 1935, w/ immediate economic relief & reform addressed, The New Deal turned to Social Welfare - more legislation... • National Labor Relations Act (Wagner Act)- it gave labor unions more power by legitimizing them and allowing labor tactics such as collective bargaining & collective action (strikes, etc...) - it outlawed many anti-union practices

  41. Works Progress Administration (WPA) • Employed authors, artists, and musicians to entertain, write, and perform for the public.

  42. Kansas Cityfrom Politics, Farming, & the Law • Thomas Hart Benton,1936

  43. Construction of the Damby William Gropper

  44. Social Security Act (1935)- feared by opponents as “creeping socialism”Provided unemployment insurance, old age pensions, and disability insurance for US citizens paid for by a new Social Security tax

  45. Election of 1936 • FDR won easily (v Rep. Alf Landon - Kansas governor) • this victory gave FDR a mandate to continue his New Deal policies • first objective: to reorganize the Supreme Court - they disallowed some New Deal legislation • FDR wants # of judges changed from 9 15 (to "pack the court") - great opposition, so FDR w/drew this proposal • but judges retired & FDR got to appoint new ones  they approved all New Deal legislation

  46. In the late 1930's – New Questions arose… • FDR was very concerned with international issues like Germany and Japan • In 1939 he proposed no new major domestic reform measures (1st time in his pres.) • ELECTION OF 1940 - FDR broke with tradition & ran a 3rd time • FDR v. Wendell Wilkie - the big issue here was American support of the Allies (GB), now embroiled in WWII against Germany (WW2 started in 1939) • Both political parties wanted to support England, but wanted to remain Neutral overall • America looked to be more Isolationist in foreign policy because of aggression by other countries.

  47. Impact of the New Deal • It was a revolution in American culture and politics - more govt involvement but within the context of traditional U.S. democracy (Not Socialism) • The New Deal stimulated the U.S. economy some, but WWII is what ends the Great Depression  unemployed found jobs in munitions factories and the military as the U.S. became the ARSENAL OF DEMOCRACY • The New Deal expanded the U.S. govt into: 1) economy - constant govt intervention and deficit spending 2) social reform - welfare state - after this point the U.S. govt was expected to play a role in any economic crisis • So, FDR fundamentally transformed American society with the New Deal… • BUT, WORLD WAR II IS WHAT FINALLY ENDS THE GREAT DEPRESSION.

  48. How many Alphabet Soup programs were there in the New Deal? • 100 • 43 • 28 • 10 • B. 43

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