CH 32 Part 2 Notes
Foreign Policy Flounderings & Unraveling the Debt Knot
REVIEW my notes in Part 1  on the Inter-War Years Foreign Policy in the Western Hemisphere and the
World—
Key Point:*******************************************************************************************
Almost overnight WWI had reversed the international financial position of the USA –America had been a
debtor nation (we owed $) about 4 billion to a Creditor Nation by 1922 (Countries owe us $) about 16
Billion  The American Dollar began to take the place of the British Pound Sterling as the World’s
strongest and most used currency. American Investors loan 10 Billion$$ to foreign Countries in the
1920’s alone—BUT THE WORLD ECONOMY WAS IN SHAMBLES—and our rising tariff laws- FordneyMcCumber and later Hawley-Smoot would make it even worse—The Allies were upset that their blood
had won the war but it did not make a difference—COOLIDGE WANTED HIS $$ BACK—THE DAWES AND
YOUNG PLANS (SEE NOTES PART 1) ARE AN EFFORT TO HELP—BUT IT WAS TOO LITTLE TOO LATE
{For a visual explanation of the “Financial Merry-Go-Round” or the Dawes Plan see the Flow Chart on p.
764 in the Digital Edition of the Text}*****important to understand********
Explanation of conditions:
The Allies (Britain and France) demanded that the Germans make enormous reparation payments (32
Billion) as compensation for war-inflicted damages—Britain and France wanted to use this $$$ to repay the USA it massive war-time loans—Germany in response to this vicious and ignorant demand
allowed its currency to inflate dramatically (just printing the deutschmark) especially after France
invaded the Ruhr Valley in 1923—The German economy shattered—a loaf of Bread cost 480 million
marks—GERMAN WORKERS WERE BEING PAID 5 TIMES A DAY---THEY BECAME DESPERATE—AND ON
THE BRINK OF ANARCHY---THIS DISASTER THREATENED TO BRING DOWN THE WORLD’S ECONOMY—
The Dawes Plan first and the Young Plan later both attempt to settle the financial crisis down by loaning
Germany $$$ and re-financing their debt --- this way the Brits and the French could actually pay us back
(they don’t) After the Crash in 1929 this HOUSE OF CARDS COLLAPSES—
Long-Term Effect:
Ill will –bad feelings in Europe towards America and in America for being stupid enough to loan
desperate nations our $$$---THIS GOES A LONG WAY TO HELPING AMERICA QUESTION WHETHER TO
GET INVOLVED IN WWII AND REALLY DELAYS OUR EFFORTS TO HELP EUROPE AGAINST HITLER.
*****THE FINANCIAL CHAOS OF EUROPE, SPECIFICALLY GERMANY LED TO THE RISE OF ADOLF HITLER
AND ALLOWS HIM TO BECOME THE DEMOCRATICALLY ELECTED LEADER OF A RISING NAZI GERMANY
THAT TERRORIZES THE WORLD –VERY SOON.
The Triumph of Herbert Hoover****(remember his quote that begins the Chapter)
Self-made Millionaire, orphan, former mining engineer educated at Stanford University, former miracle
worker as head of the Food Administration in WWI, and former Secretary of Commerce to both Harding
and Coolidge---Herbert Hoover becomes the Republican Candidate for President in the election of 1928.
“Hoo but Hoover” (campaign slogan—Dr. Suess like don’t you think?)
NY Governor Al Smith – a Roman Catholic- with his harsh NY accent was nominated by the Democrats--which did not play well in the South—or West—or in many places except NY 
“the Happy Warrior”
Radio figured prominently in the election, the first time it did so--******
Hoover, from the West, a self-made man, and hero---preached “RUGGED INDIVIDUALISM”==and he was
a protestant with no accent—and prosperity was sky high—his party in power---HE CRUSHES AL SMITH
RELIGIOUS BIGOTRY PLAYED A HUGE PART IN HOOVER’S WIN—“A VOTE FOR AL SMITH IS A VOTE FOR
THE POPE”---YET THE DEM’S STILL WIN SOME OF THE “SOLID SOUTH” BUT HOOVER DOES WIN MORE
SOUTHERN STATES THAN ANY REPUBLICAN CANDIDATE EVER---TEXAS, NC, TENN, VA AND WON ALL
OF THE BORDER STATES—
President Hoover’s First Moves
Two quotes summarize Hoover-**********KNOW THESE*****************************************
1- His belief that prosperity would last forever“We in America today are nearer to the final triumph over poverty than ever before in the history of
any land. We have not yet reached the goal—but… we shall soon, with the help of God, be in sight of
the day when poverty will be banished from this nation.” (1928 while campaigning for Pres.)
2- His belief in “Rugged Individualism” and “Small Government” –
“I do not believe that the power of the General (Federal) Government ought to be extended to the
relief of individual suffering… The lesson should be constantly enforced that though the people
support the Government the Government should not support the people.” (Hoover quoting the
conservative Democrat Grover Cleveland when he vetoed a bill to help farmers recover from a
drought in Texas in 1887—Hoover was speaking in 1930 as the Great Depression worsened and
MILLIONS WERE STARVING TO DEATH)
Note:************************************************************************************************
The second quote is an important point due to the current conflict in our nation about—What
role/responsibility the Federal Government has/should play during economic difficulties or even when
things are going well---Should the people expect the/their Government to support them?? A little?? A
lot?? None at all?? Survival of the Fittest??? Does it ruin them??? Or does it give them the needed leg up to
move ahead?? Enough to survive?? It is their own fault they are poor??? I KNOW YOU HEAR ALL OF
THESE STATEMENTS AND HAVE AN OPINION---LET’S MAKE SURE TO STUDY THE GREAT DEPRESSION
AND EXAMINE THE ACTIONS OF HOOVER V. FDR---AND YOU TELL ME WHAT YOU WOULD DO????
THINK OF JUST THE LAST 8 YEARS---DO YOU KNOW ANYONE WHO HAS STRUGGLED DUE TO NO
NEGATIVE ACTIONS OF THEIR OWN??? OR WAS IT THEIR OWN FAULT??? IT IS A QUESTION FOR OUR
TIME AND CERTAINLY IS A QUESTION DURING THE GREAT DEPRESSION.
Back to notes 
Hoover when he takes office recognizes the difficulties in Agriculture and encourages Congress to pass a
law—The Agricultural Marketing Act, 1929 – creating Producers cooperatives—and creating the Federal
Farm Board – with a fund of ½ a billion dollars --$$ was lent to farm organizations to buy, sell, and store
agricultural surpluses. THE FARM BOARD- created two corporations:
1- The Grain Stabilization Corporation – 2- The Cotton Stabilization Corporation – the GOAL of BOTH
was to bolster crashing prices by buying up surpluses –Wheat which was 3$ a bushel in 1920 by
1929 was at 57 cents a bushel--- and Cotton to 5 cents a pound---Both of these corporations
become ineffective due to the massive need and little $$$ to help.
Farmers held out hope—Hoover pledged in his campaign to lower the tariff---and that would at least
lower prices on manufactured goods they had to purchase----HOWEVER—THE HAWLEY-SMOOT OR
SMOOT-HAWLEY (AS IN FERRIS BEUHLER’S DAY OFF  ) OF 1930—
H-S TARIFFStarts out as a measure to help farmers—BUT—it acquired 1,000 amendments to the bill—AND TURNS
OUT TO BE THE HIGHEST PROTECTIVE TARIFF BILL IN AMERICA’S PEACETIME HISTORY—(obviously
HH did not keep his promise to farmers) The average tax on foreign goods was now 60%-To some the H-S Tariff was an ECONOMIC DECLARATION OF WAR ON THE ENTIRE WORLD--- it massively decreased trade world-wide in the middle of the Great Depression, making it worse.
- it increased International chaos due to the massive economic chaos—
- It does show that America had become ECONOMICALLY ISOLATIONIST
- IT LED DIRECTLY TO THE RISE OF FASCISTS IN EUROPE
The Great Crash Ends the Golden Twenties***********HUGE**********KNOW DETAILS***********
October 1929- Black Tuesday—The Stock Market Crash
Partially caused when Britain raised its interests rates it paid on investments—make more $$$ --which
caused some to sell stocks to put their $$ in British investments.
When selling began on Monday---it became infectious---an “orgy of selling” began and prices began to dro
On “Black Tuesday” Oct 29, 1929—16 million shares were sold in a scramble/26 million “lost” in one day
–suicides skyrocketed as people were “crashed” broke jumpers-- in two months --investors in “Blue
Chip” stocks (the most stable and valuable companies) lost $40 BILLION DOLLARS—(MORE THAN THE
ENTIRE COST OF WWI TO THE USA)
The Stock-Market Crash signaled the beginning of the USA’s entry into the WORST ECONOMIC
COLLAPSE IN WORLD HISTORY****** THE USA SUFFERED MORE OR AT LEAST AS MUCH AS ANY
COUNTRY IN THE WORLD –INCLUDING GERMANY--BY THE END–14 MONTHS AFTER THE CRASH 4 MILLION WERE UNEMPLOYED—BY 1932 12 MILLION
WERE UNEMPLOYED-- 50% OF AMERICANS LOST JOBS—IN THE OTHER ½ --50% OF THEM ONLY
WORKED ½ TIME--- IN SOME CITIES-EX. TOLEDO, OHIO UNEMPLOYMENT WAS 80%--1/3 OF ALL
FARMERS LOST THEIR LANDFROM 1929 -1933 over 11,000 BANKS FAIL (1/2 OF ALL BANKS IN THE USA) 7 BILLION IN SAVINGS
LOST—THE NATIONAL INCOME FELL BY 50% .---AND TAKING WITH THEM THE LIFE SAVINGS OF
OVER A MILLION PEOPLE ---AT NO FAULT AT ALL EXCEPT TRUSTING A BANK--COUNTLESS #’S OF HONEST-HARD WORKING CITIZENS LOST THEIR HOME’S AND FARMS –HAD NO
FOOD FOR THEMSELVES OR THEIR CHILDREN TENS OF THOUSANDS OF AMERICANS STARVED TO
DEATH--MOST AMERICANS BLAMED THEMSELVES—DESPITE ABUNDANT EVIDENCE THAT THE ECONOMIC
SYSTEM, NOT INDIVIDUALS, HAD FAILED—
“BROTHER CAN YOU SPARE A DIME” –BECOMES THE SONG OF THE ERA—BY STUDS TERKEL
Hooked on the Horn of Plenty
What caused the Great Depression?
1-Overproduction by both Farm and Factory
2-Over-speculation—Buying stock’s on Margin & Buying goods on Credit
3-The nations ability to produce had grown faster than its ability to consume.
4-Too much money was going into the hands of too few---not enough into wages and salaries—
purchasing power of the middle class was reduced by the “Trickle Down Theory” thus less consumption
5- Machinery saved time and produced more but people out of work—technological improvements
6- The economies of Europe were closed to us do to our high tariffs—thus less foreign trade
7-The economies of Europe were already crashing—Banks failed in Britain and Austria for example
which caused problems in the USA
8-The European Countries unable to pay back the loans from the Dawes and Young plans which were
loaned to them by private US Banks9- Drought in the West & Mississippi Valley (Dust Bowl beginning)
-over 1/3 of all Farms were “gone”
By 1930 –THE GREAT DEPRESSION HAD BECOME A NATONAL DISASTER***
-THROUGH NO FAULT OF THEIR OWN MILLIONS OF AMERICANS HAD LOST EVERYTHING AND WERE
STARVING TO DEATH
-THERE WERE NO JOBS--- “0”
****- PEOPLE SLEPT OUTSIDE UNDER “HOOVER BLANKETS” OR BUILT TEMPORARY HOUSING ON
GARBAGE DUMPS-“HOOVERVILLES” OR ROAD THE RAILS---TRYING TO FIND WORK OR FOOD OR
HOUSING OR JUST TO FORGET HOW HUNGRY AND DEPRESSED THEY WERE- “HOBOES”
“THE VERY FOUNDATIONS OF AMERICA’S SOCIAL AND POLITICAL STRUCTURE TREMBLED”
Rugged Times for Rugged Individualists
Hoover—crashed as well---before this his reputation was as THE “GREAT HUMANITARIAN”---no more.
HH—believed in “Rugged Individualism” – and therefore was convinced that hard work, thrift, and selfreliance was what made America Great ---and FEARED THAT GOVERNMENT HELP TO INDIVIDUAL
PEOPLE WOULD WEAKEN OR DESTROY OUR NATIONAL CHARACTER--HH—COMPROMISES --??? --- HE HELPS BUSINESSES NOT PEOPLE—HE FELT THAT IF HE HELPED
BUSINESS PROSPERITY WOULD “TRICKLE DOWN TO THE MASSES” ???
HH’S CRITICS –Claim that he would lend $$$ to banks, who got us in this mess, and give $$$ to
AGRICULUTURAL ORGANIZATIONS TO feed pigs, BUT NOT HUMAN BEINGS--HH’S PHILOSOPHY OF “PULLING YOURSELF BY YOUR BOOTSTRAPS” DOES NOT WORK IF YOU DON’T
HAVE BOOTS***
Herbert Hoover—his programs to “solve” the Great Depression—THEY FAIL***
HH’S TRICKLE-DOWN PHILOSOPHY –
1-Congress appropriates 2.25 billion for “public works” ---BUT ONLY APPROVED A FEW WORKS
SPENDING VERY LITTLE OF THE 2.25 BILLION – “HOOVER DAM” IS ONE EXAMPLE OF A “PUBLIC
WORK”
2- HH – vetoes many projects thought to be “socialistic” TVA is one example due to the TVA competing
with private utility companies to sell electricity (although there were no companies selling electricity in
Appalachia)
3 RFC- Reconstruction Finance Corporation- ½ a billion$$$ ---A GOV’T LENDING BANK—it loaned $$$ to
Banks, Insurance companies, Railroads, State and Local Governments---BUT ABSOLUTELY NO LOANS TO
INDIVIDUALS---these loans eventually make millions for the banks 
4 Norris-LaGuardia Anti-Injunction Act, 1932 – outlawed “yellow-dog” contracts (the company forbidding
an employee from joining a union) and allowed for peaceful strikes, picketing, and boycotts.
5 Home Loan Bank Bill -- $$$ to Banks to save Banks due to failure of people to pay their mortgage loans
6 VARIOUS AGRICULTURAL ACTS PREVIOUSLY MENTIONED***
Routing the “Bonus Army” in Washington D.C.
Veterans of WWI wanted their “bonus” (from the Adjusted Compensation Act-Bonus Bill 3.5 billion)
PAID NOW---MANY WERE STARVING TO DEATH—
THOUSANDS (20) COME TO WASHINGTON AND “CAMP” IN TENTS AT THE “MALL” TO PROTEST AND
LOBBY CONGRESS TO PAY THEIR “BONUS” EARLY— CALLED THE “BEF” bonus expeditionary force—
Their lobbying FAILED in a close vote in Congress--- THEY ARE ORDERED TO LEAVE DC---THEY DO
NOT—RIOTS BREAK OUT---HOOVER BARRACADES HIMSELF IN THE WHITE HOUSE AND CALLS OUT
THE US ARMY TO ATTACK AND FORCE THE STARVING VETERANS AND THEIR FAMILIES TO LEAVE—
OR ELSE--GEN. DOUGLAS MACARTHUR LEADS A FORCE WITH TEAR GAS, MACHINE GUNS, AND TANKS AND
DESTROYS THE VETERANS AND THEIR FAMILIES---MAYBE THE SADDEST DAY IN AMERICAN
HISTORY!!! The Battle of Anacostia Flats—
HH becomes the most hated man in America and had no chance to be re-elected in 1932!!! FDR and the
Democrats and the “new deal” was on the way!!!
Japanese Militarists Attack China—the world was going crazy
In September 1931, Japan invades Manchuria (China) and crushed any opposition ---renaming it
“Manchuko” and placing the former emperor as a figurehead leader controlled by Japan.
This action was a flagrant violation of a number of treaties and the League of Nations Covenenat—
The USA reacts by publishing the “STIMSON DOCTRINE”—which stated that the USA would not recognize
any territorial acquisition achieved by Force---JAPAN LAUGHS AT US AND SAYS WHO CARES
WWII IS BORN ON THE PLAINS OF MANCHURIA WHEN THE WORLD DID NOTHING AS MILLIONS OF
CHINESE ARE SLAUGHTERED BY THE JAPANESE—{RAPE OF NANKING-BOMBING SHANGHAI)