The 1920’s, The Great
Depression and New Deal
1920 - 1940

During the 1920's there is great prosperity
Businesses are booming
 Women

 19th Amendment in 1920 – Right to vote
 Flappers - fashionable young woman intent on enjoying
herself and breaking standards of behavior

Entertainment
 Newspapers/magazine shape cultural fads
 Radio broadcasts news, jazz and Fireside chats
 First movies w/sound (Jazz Singer)
 Escape for people during the Great Depression

Scopes Trial



New KKK


Darwin’s Theory of Evolution
John T Scopes, an educator, arrested for teaching evolution
Anti-foreign, anti-Catholic, anti-black, anti-Jewish, antipacifist, anti-Communist, anti-internationalist, antirevolutionist, anti-bootlegger, anti-gambling, anti-adultery,
and anti-birth control.
Prohibition – 18th Amendment


Prohibits alcohol
Leads to smuggling by gangsters/mobsters and speakeasies
(illegal bar/nightclub)
Black Tuesday October 29, 1929

The Great Depression is caused by:


Over production by business
Reckless investment practices (Collapse of the
Stock Market)
 Over speculation of the Stock Market
 Buying on Margin

Banking collapses (Cause and Effect)

High protective tariffs

What happens to inventory when you have
companies continuing to make products and
no one buys them?
 Products build up producing a surplus

Then when you have a surplus what happens
to prices?

Prices Drop

What happens to a companies profits when
prices drop?

They drop

What happens to workers when companies
are not making money?

Workers get laid off

What happens when workers get laid off?
 They can't afford to by products so supply stays
high and demand remains low.
 More workers get laid off and the downward
trend continues. This is Supply and Demand
 Unemployment today is about 5.5%; during the
Great Depression it was 25% or more (1932 - 1934)



Early 1920’s, supply was very high and at the
beginning of the 1920's so was demand,
keeping prices steady
Late 1920's, demand was slacking off;
businesses didn't drop their production
The increase supply causes the businesses to
cut their labor force thus helping to cause the
Great Depression.

What is Over Speculation?

Paying more for stocks than they are worth,
because you believe they will go up in value

Reckless Investment – Buying on Margin

People used borrowed money to buy stocks
Great Depression Causes: Over Speculation of Stocks and
Stock Market Crash
Price Per
# of Shares Total Price
$ Borrowed if $ you get at
Share
on Margin
sale
$1.00
100
$100 $0 (Not on
$100
margin)
Great Depression Causes: Over Speculation of Stocks and
Stock Market Crash
Price Per
# of Shares Total Price
$ Borrowed if $ you get at
Share
on Margin
sale
$1.00
100
$100 $0 (Not on
$100
margin)
$1.00
100
$100
$90
$10
Great Depression Causes: Over Speculation of Stocks and
Stock Market Crash
Price Per
# of Shares Total Price $ Borrowed if $ you get at
Share
on Margin
sale
$1.00
100
$100 $0 (Not on
$100
margin)
$1.00
100
$100
$90
$10
$3.00 Price
increases
100
$300
$0
$300
Great Depression Causes: Over Speculation of Stocks and
Stock Market Crash
Price Per
# of Shares Total Price $ Borrowed if $ you get at
Share
on Margin
sale
$1.00
100
$100 $0 (Not on
$100
margin)
$1.00
100
$100
$90
$10
$3.00 Price
increases
$3.00 Price
Increases
100
$300
$0
$300
100
$300
$90
$210
Great Depression Causes: Over Speculation of Stocks and
Stock Market Crash
Price Per
# of Shares Total Price $ Borrowed if $ you get at
Share
on Margin
sale
$1.00
100
$100 $0 (Not on
$100
margin)
$1.00
100
$100
$90
$10
$3.00 Price
increases
$3.00 Price
Increases
$0.50 Price
Decreases
100
$300
$0
$300
100
$300
$90
$210
100
$50
$0
$50
Great Depression Causes: Over Speculation of Stocks and
Stock Market Crash
Price Per
# of Shares Total Price $ Borrowed if $ you get at
Share
on Margin
sale
$1.00
100
$100 $0 (Not on
$100
margin)
$1.00
100
$100
$90
$10
$3.00 Price
increases
$3.00 Price
Increases
$0.50 Price
Decreases
$0.50 Price
Decreases
100
$300
$0
$300
100
$300
$90
$210
100
$50
$0
$50
100
$50
$90
- $40
Business Cycle: Comparison
350
After Great Depression
Before Great Depression
400
350
300
300
Stock Value
Stock Value
250
200
150
100
250
200
150
100
50
50
0
0
Years
Years
Answer the following:
 Briefly explain how over production helped
to cause the Great Depression.
 Briefly explain the way buying on margin
helped to cause the Great Depression.

Federal Reserve's failure to prevent collapse
of the nation's banking system in late 20's
and early 30's. This led to contraction in the
nation's money supply.
What is the Federal Reserve?
 What is Contraction?


So, Banks began to collapse but why?

You put your $ in the bank say $1000.
The bank then lends your $ out (with interest) to
someone else. This how the bank makes $
 The collapse takes place when you (and everyone
else) want their money out of the bank.
 The money has been loaned out and there is no
money to pullout, the bank closes. With so many
banks closing the amount of money out there
begins to shrink.





Example. The bank has $100,000 in it from 10
different people.
The bank takes that $100,000 and loans out $60,000
of it.
Now when the economy starts to go bad, like it
did in the late 1920's early 1930's, the 10 people
want their $100,000.
However, the bank only has $40,000. The Bank
goes to the people it loaned the $ to, they can't
pay. So, the bank can't pay the 10 people their $, it
shuts down.
Great Depression Causes:
High Tariffs
 IMPORTANT FACT: High protective tariffs
like the Tariff Act of 1930 (Hawley-Smoot Act)
that produced retaliatory tariffs in other
countries, slowing world trade.

In 1930, the US passed the Tariff Act of 1930.



Hawley-Smoot Act
This raised tariffs to their highest level in US
history: 60%. (Remember that a tariff is a tax
placed on imports from another country.)
Any country trading with the US, their
products would be more expensive than they
were before. This causes other countries to
raise their tariff rates.
Great Depression Causes:
High Tariffs (video)
So, in a nut shell the whole world stops
trading with each other because they will not
make any money. They will not make $
because no one will buy imported goods,
they are too expensive.

IMPORTANT QUESTION: What were the causes
of the Great Depression?


OVER PRODUCTION
RECKLESS INVESTMENT PRACTICES
 over speculation on stocks, using borrowed money to buy stocks,
stock market crash.


FEDERAL RESERVE'S FAILURE TO KEEP THE
BANKING SYSTEM FROM COLLAPSING.
HIGH PROTECTIVE TARIFFS LIKE THE HAWLEYSMOOT TARIFF ACT. (1930)

Unemployment and Homelessness


Collapse of Financial system


(bank closings)
Political unrest


(Hoovervilles and Blankets)
(growing militancy of labor unions)
Farm foreclosures and migration
What are foreclosures?
 Dust Bowl

Unemployment during
the Great Depression
Unemployment
% of nonfarm workers unemployed
40
12,830,000
30
10,390,000
7,700,000
20 4,918,000
10
0
1920
2,190,000
1,982,000
1,049,000 801,000
1926
670,000
1932
1935
Years
1940
1945
The New Deal
1933 - 1940




Great Depression caused hardships
1930 – 1932, government does little to help
out
Herbert Hoover believed the economy would
fix itself
1932 election Franklin Delano Roosevelt
crushes Hoover



Franklin D. Roosevelt (FDR) wanted to
change the role of government.
It should be more active in solving the
problems of the country.
FDR, in his inauguration speech, rallied the
people when he stated “Only thing we have
to fear is fear itself."
New Deal
 New Deal tries to fix causes and effects 3
ways
Relief
Recovery
Reform
New Deal Agencies
 Glass-Steagall Act
 Civilian Conservation Corps
 Works Progress
Administration
 National Recovery Act
 Public Works Administration
 1st Agricultural Adjustment
Act
 Securities and Exchange
Commission
 Tennessee Valley Authority
 Federal Housing Authority
Social Security Act
Wagner Act
Fireside Chats
Emergency Banking Relief
2nd Agricultural Adjustment
Act
Indian Reorganization Act
Fair Labor Standards Act

Unemployment was an effect of the
depression.

To fix this…the "new deal" came up with Works
Progress Administration (WPA).
 People were given jobs by the government. These
relief measures provided direct payment to people for
immediate help

Farmers having problems was also an effect
of the depression.

To fix this…the “New Deal“ came up with the
Agricultural Adjustment Administration (AAA)
 This would help bring the nation out of the
depression over time.
 Like reducing the number of pigs or gallons of milk.

Banking closures were a cause of the
depression

To fix this…the “New Deal" came up with the
Federal Deposit Insurance Corporation (FDIC).
 This reform measure corrected unsound banking and
investment practices to prevent future problems.

People not having savings in the bank in
later life was an effect of the Great
Depression

Social Security Act offered safeguards for workers
 Provides for retirement and worker benefits like
disability (SSI and SSDI).

Understand, this time period deeply changed
America and the American people.
A whole generation of Americans went without,
thus affecting future generations (i.e. Baby
Boomers)
 This era saw a change in the role government
played in the lives of the American people.

 New Deal Legacy – Government is responsible for
some public services and promote general welfare
Unemployment during
the Great Depression
Unemployment
% of nonfarm workers unemployed
40
12,830,000
30
10,390,000
7,700,000
20 4,918,000
10
0
1920
2,190,000
1,982,000
1,049,000 801,000
1926
670,000
1932
1935
Years
1940
1945