Justin Gotshaw
Great Depression Paper
The Great Depression began in 1929 and lasted until the beginning of World War
II. The stock market crash that happened on October 29, 1929, also known as “Black
Tuesday”, was the main cause of the Great Depression. A sustained recovery began in
late 1932 or early 1933 (Fearon). Between 1929 and 1933 wholesale prices in the
majority of the world’s most advanced industrial countries declined by 30-40 percent
(Fearon). The practice of “buying on margin” allowed people to purchase stocks on credit
and pay as little as 10 percent cash (Stock). In September 1929 the price of stocks began
to lower which lead to people rushing to sell their stocks which lead to the stock market
not being able to keep up with the prices of stocks (Stock). To try and fix the problem, a
group of bankers decided to meet with Thomas W. Lamont of J.P. Morgan and Company
and buy stock above the current levels of the market at that time (Stock). This solution
worked for a little while until October 29, 1929 when the stock market crashed. At the
time of the crash, the value of stocks on the exchange had declined by 37.5 percent
(Stock). The main cause of the Great Depression can be traced back to the Laissez-faire
approaches of the presidents during the 1920s which lead to no regulation of
buying/selling of stocks and bonds, control over banking, manufacturing, or agricultural
production (Causes). The Laissez-faire approach of the 1920s also led to no statistics
being gathered about the stock market during the time period. Another cause of the Great
Depression was the “get rich quick” mentality of the American people (Causes).
Americans would spend all of their money trying to look like movie stars and buying
land in Florida and California (only to see that the land was swamps and deserts)
(Causes). The people who bought land turned to the stock market to replace their losses
(Causes). Other causes of the Great Depression include chronic agricultural
overproduction and low prices for farm products, overproduction of consumer goods by
manufacturing companies, concentration of wealth in the hands of few, structure of
American business and industry, investors’ speculation, lack of action by the Federal
Reserve, and an unsound banking system (Causes). Things began to look better in 1932
went Franklin D. Roosevelt was elected president. Roosevelt took action very soon after
being elected to fix the nation’s economy. Roosevelt started by summoning Congress to
convene in special session to deal with banking crisis (Kennedy). By the time, Congress
met all the banks in the U.S. had been closed under presidential order. During the
meeting, Roosevelt proposed the emergency banking bill which would extend the helping
hand of the government to assist private bankers to get back on their feet (Kennedy). The
bill authorized the Federal Reserve Board to issue additional currency secured by bank
assets, directed the Reconstruction Finance Corporation (agency created under president
Hoover) to purchase preferred bank stock, extended the government’s control over gold
holdings, and mandated Treasury Department supervision of the reopening and
reorganization of the banks across the nation (Kennedy). The meeting with Congress
lasted for three months and during this time; Roosevelt proposed more bills to help the
nation’s economy to get back to normal. These bills include the Federal Emergency
Relief Act, the Civilian Conservation Corps, the Homeowners’ Loan Act, the Emergency
Farm Mortgage Act, the Farm Credit Act, the Glass-Steagall Banking Act, the Tennessee
Valley Authority Act, the Agricultural Adjustment Act, the National Industrial Recovery
Act (Kennedy). These three months that Congress met with Roosevelt became known as
the “Hundred Days.” All of the acts proposed by Roosevelt helped the nation in its own
way. The Federal Emergency Act funded the unemployment compensation programs of
the states, whose treasuries had been overwhelmed by the depression (Kennedy). The
Civilian Conservation Corps created hundreds of thousands of jobs on federal projects
which included reforestation, road building, and flood control (Kennedy). The
Homeowners’ Loan Act, the Emergency Farm Mortgage Act, and the Farm Credit Act all
helped financial institutions, homeowners, and farmers by providing various ways of
refinancing of their debts under government auspices (Kennedy). The Glass-Steagall
Bank Act created the Federal Deposit Insurance Corporation (FDIC) which insures bank
deposits up to $5,000 (Kennedy). The Tennessee Valley Authority Act created jobs in
Tennessee to develop the vast Tennessee River Basin (Kennedy). The Agricultural
Adjustment Act attempted to stabilize agricultural prices by crop limitation and
government regulation as well as introducing an amendment that allowed the president to
undertake various steps to inflate the currency (Kennedy). The National Industrial
Recovery Act called for the establishment of codes governing production, pricing, and
labor practices as well as adding an additional $3.3 billion to public work programs
(Kennedy). All of these programs became known as the New Deal. The main group in
charge of getting businesses in the major industries to agree to the new codes and
regulations proposed by the government was the Nation Recovery Administration. The
NRA used the tactic of portraying the business men as evil monsters with a blue eagle
flying above them as their symbol to convince the businesses to agree to the new codes
and regulations proposed by the government (Kennedy). The NRA was deemed
unconstitutional on May 27, 1935 which forced Roosevelt and Congress to create a new
plan to help further fix the nation’s economy (Kennedy). The first real big measure to
create new programs came from Robert Wagner (Senator from New York), who
introduced the Wagner Act establishing the National Labor Relations Board (Kennedy).
The Banking Act brought the Federal Reserve under closer supervision of the
government (Kennedy). The Public Utility Holding Company Act eliminated the private
companies that had monopolies on the utilities of the country and allowed the Federal
Power Commission to regulate the distribution of power around the nation and the
Federal Trade Commission to do the same with natural gas (Kennedy). The most
important of the new acts was the Social Security Act (Kennedy). The Social Security
Act provided for joint federal-state programs of unemployment compensation, paid for by
federal payroll taxes (Kennedy). It also created an exclusively federal system of old-age
and survivors’ insurance funded by a tax shard between employers and employees
(Kennedy). The Great Depression was a horrible financial crisis during our country’s
history. The programs created through both of the new deals proposed by FDR brought
us out of the financial crisis and some of the programs created then are still around today
to help protect us from future economic crises.
Citations
“Causes of the Great Depression.” Great Depression and the New Deal Reference
Library. Ed. Allison Mitchell, Richard C. Hanes, and Sharon M. Hanes. Vol. 1:
Almanac. Detroit: UXL, 2003. 1-20. Gale U.S. History In Context. Web.
18 April 2012.
Fearon, Peter. “Great Depression of the 1930s.” History of World Trade Since 1450. Ed.
John J. McCusker. Vol. 1. Detroit: Macmillan Reference USA, 2000. 332-336.
Gale U.S. History In Context. Web. 20 April 2012.
Kennedy, David M. “Roosevelt, Franklin D.” Presidents: A Reference History. Ed.
Henry F. Graff. 3rd ed. Detroit: Charles Scribner’s Sons, 2002. 427-443.
Gale U.S. History In Context. Web. 20 April 2012.
“Stock Market Crash of 1929.” Gale Encyclopedia of U.S. Economic History. Ed.
Thomas Carson and Mary Bonk. Detroit: Gale, 1999. Gale U.S. History in
Context. Web. 21 April 2012.