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Unit 5: Great Depression & New Deal. Stock Market Crash. October 29 th , 1929 Great Depression: 1930s President Franklin D. Roosevelt’s “New Deal” Dominates all phases of life in US in the 1930s Changes America forever Includes economic, social, political, psychological issues

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stock market crash
Stock Market Crash
  • October 29th, 1929
  • Great Depression: 1930s
  • President Franklin D. Roosevelt’s “New Deal”
  • Dominates all phases of life in US in the 1930s
  • Changes America forever
  • Includes economic, social, political, psychological issues
  • Forces re-evaluation of American values
  • Challenges whole concept of the “American Dream”
before the crash
Before the crash…
  • Things “appeared” to be good
    • “Boom Times”
  • However:
    • Major problems beneath surface
    • Vicious economic cycle
      • Low interest rates
      • Encourages borrowing money
      • People borrow to buy stocks
      • People sell stocks to make money
      • Higher interest rates to entice saving
      • Banks, businesses demand payments on loans = less money
      • Less money = less stock buying = stock prices drop
      • Stock prices drop = value of companies, businesses, dollar drops
      • Business fail = can’t pay off loans
      • Workers fired = can’t pay off loans
      • Banks fail = no loans for businesses
      • Businesses fail = fire workers
please note
PLEASE NOTE…
  • The Stock Market Crash did NOT cause the Great Depression, it only signaled the beginning of it. The causes of the Depression were already in place
prosperity shattered
Prosperity Shattered
  • Economic troubles on the horizon, but nobody noticed
    • Confidence credit purchases 6x higher
    • Low interest rates  more borrowing/buying
    • Playing the stock market (Bull market)
    • Problems
      • Not stable
      • No long term growth
      • Stock prices inflated (supply and demand)
      • Margin buying Buying stocks on credit
stock market crash1
Stock Market Crash
  • Many investors sold stocks because of concerns about rising interest rates
  • This caused investor confidence to drop which led to less demand for stocks which led to a drop in prices which led to sell-offs = PANIC!!!
  • October 24, 1929 “Black Thursday”
  • October 29th, 1929 “Black Tuesday”
    • 16 million stock shares sold
    • US stockholders lost $30 billion
banking crisis
Banking Crisis
  • Banks call in loans but borrowers defaulted (can’t pay off loans) = banks close
    • Depositors rush banks to get money out
    • 1930-1932 = 5,000 banks fail and shut down
    • No banks = no businesses = fire workers = no buying/borrowing = businesses fail
  • 1930-1931: 56,000 businesses fail
  • 1929 GNP = $103/1933 = $56 billion
  • 1929 = 3.2% unemployment/1932 =23.6%
three major causes
Three Major Causes…
  • Overall global depression
    • WWI war debts = no buying US goods
    • Smoot-Hawley Tariff 1930
  • Income gap and domestic consumer debt
    • Disposable income of top 1% up 63%
    • Disposable income of lowest 93% down 4%
  • Normal business cycles based on supply and demand:
    • Overproductionsurplusdemanddropspricesdroploss of profitstoo much borrowing, etc.
hard times
Hard Times
  • Big issue was unemployment
    • 1929: 1.5 million Americans out of work
    • 1933: 15 million Americans out of work
    • Drop in wages/work hours for employed
    • African Americans suffer even more
    • Some women benefit: Cheaper to hire
life in the city
Life in the City
  • Hunger
  • Homeless
  • No jobs
  • Shantytowns
  • Bread lines
  • Loitering
  • Crime
  • 20% of kids in NYC were malnourished

NO GOVERNMENT ASSISTANCE = LAISSEZ FAIRE

life on the farm
Life on the Farm
  • Major drop in sales of products
    • Produce and livestock destroyed because of a major loss in profits
    • No profits = farmers can’t pay back loans
      • Banks foreclose on mortgages
      • Farm equipment repossessed
      • Land becomes useless = Dust Bowl
      • Many farmers hit the road = migrants
family life
Family Life
  • 1930s=Huge strain on traditions
    • Role of father/husband/provider questioned
    • Delayed marriages = lower US birthrate
    • Psychological pressures = suicides up 28%
    • Popular culture/entertainment = escapism (realism)
media
Media
  • Literature during the Depression = Realism
    • John Steinbeck: Grapes of Wrath
    • Zora Neale Hurston: Their Eyes Were Watching God
    • Richard Wright: Native Son
    • Margaret Mitchell: Gone With the Wind
  • Films: Escapism = Marx Brothers, the Three Stooges
do something
Do Something!
  • People looked to Hoover for guidance
  • He believed in American values and ingenuity
  • He saw the Great Depression as just part of the business cycle and refused to make a move to better the economy
  • Called the most hated man in America
hoover gov should not support the people
Hoover: “Gov. should not support the people!”
  • 1) Conservative, Social Darwinist, Capitalism
  • 2) Relief would create a large gov. bureaucracy
  • 3) Did not want to inflate the federal budget
  • 4) Fearful of reducing Americans’ self-respect
  • 5) Rugged individualism and volunteerism
  • Example: Hoover refused to support the Federal Emergency Relief Board proposed by Robert LaFollette to give $375 million for unemployment relief
some gov t intervention
SOME Gov’t Intervention
  • Hoover encouraged businesses to maintain level of production, employment and wages
  • Funding for public works projects: Hoover Dam used $800 million of gov’t funds
farm crisis
Farm Crisis
  • Agricultural Marketing ActFederal Farm Board
  • Home Loan Bank Act 1932
  • BUT Hoover still rejects direct gov’t aid
  • Help yourself! No buying up of surplus
other minor gov t action
Other Minor Gov’t Action
  • Reconstruction Finance Corporation
    • Lend $2 billion of tax payer money to stabilize banks, insurance companies, RR
    • Still based on “trickle down” theories
  • Rumblings of Discontent
    • Increasing condemnations of capitalism
    • Bonus Army MarchMay 1932
    • 1932 election of FDR
1932 time for change
1932: Time for Change
  • Born to a wealthy family, Governor of New York, created relief programs to help with Depression for New Yorkers
fdr for president
FDR For President!
  • The campaign revolved around the Depression
  • Roosevelt promised a “New Deal” for Americans
slide21
“I have no expectation of making a hit every time I come to bat. What I seek is the highest possible batting average…”
restoring hope
Restoring Hope
  • New Deal: Three levels of plans and policies
    • Relief: Short term: “stop the bleeding”
    • Recovery: Medium term: “get back to even”
    • Reform: Long term: “Never happens again”
  • VERY different than Hoover’s approach
    • 1) Strong advisory approach = “Brain Trust”
    • 2) Very activist approach-use of gov’t powers
    • 3) Took immediate steps
    • 4) Called Congress into special session
fdr s first steps
FDR’s First Steps
  • 1) Bank Holiday to stop massive withdrawals
  • 2) Emergency Banking Act—Fireside Chats
  • 3) Federal Deposit Insurance Corporation
  • 4) Homeowners Loan Corporation
relief measures frances perkins secretary of labor
Relief Measures (Frances Perkins: Secretary of Labor)
  • 1) Federal Emergency Relief Administration—H.Hopkins
  • 2) Civil Works Administration
  • 3) Civilian Conservation Corp
recovery measures
Recovery Measures
  • 1) Federal Security ActSecurities and Exchange Commission
  • 2) Concept of deficit spending: Keynes
  • 3) National Industrial Recovery Act
    • Public Works Administration
    • National Recovery Act
  • 4) Agricultural Adjustment Act
  • 5) Tennessee Valley Authority
new challenges
New Challenges
  • Major criticisms of the New Deal
    • Conservatives: New Deal did too much
      • A. Went against capitalism
      • B. FDR had too much power
      • C. Too much against tradition
    • Liberals: New Deal didn’t do enough
      • A. Did not redistribute the wealth
      • B. Still focused on private property
      • C. Did not do enough to eliminate poverty
    • Francis Townsend: $200 pension per person
    • Charles Coughlin: Gov’t should run all banks
    • Huey Long: Minimum income for all Americans
second new deal
Second New Deal
  • Critics do not deter FDR
  • More public works programs, social security, wage and hour improvements for workers
    • A. Works Projects Administration $5Billion budget
    • B. National Youth AdministrationMary M. Bethune
    • C. Social Security Act 1935
    • D. Rural Electrification Program
    • E. FDR easily wins 1936 election
    • F. National Labor Relations Act (Wagner Act)
    • G. AFL merges with CIO in 1935
    • FDR and the Supreme Court—major mistake by FDR
life in the new deal era and the new deal and the arts
Life in the New Deal Era and the New Deal and the Arts
  • Hard life all aroundmade worse by natural disaster=droughtDust Bowl
    • Ruined land, forced migrations, job comp.
    • Hardship captured by photographers
      • Dorothea Lange
overall criticisms of the new deal
Overall Criticisms of the New Deal
  • Creation of welfare state
  • Too much spending=debt
  • Gov’t, especially President, too much power
  • Free-market capitalism threatened
  • Yet, relief was successful
  • Reforms still with us today
  • Recovery, though, not until WWII
arts during the new deal era
Arts During the New Deal Era
  • Mix between realism and escapism
  • WPA $300million to create Federal Project #1
  • Encourage pride in American culture by providing work and opportunities to artists