Recap – Buying on Credit
• Buy now, pay later
• Businesses give easy credit; consumers
pile up large debts
• Consumers have trouble paying off debt,
cut back on spending
The Stock Market
 1920: stock prices rise steadily; people rush to
buy stocks, bonds
 Many engage in speculation = buy on the chance
of making a quick profit
 Buying on margin: pay small % of price, borrow
rest
Investing in Stock
Profit = $500
© 1998 by McDougal Littell Inc. All rights reserved.
Amount
borrowed
from broker
= $900
Amount
owed to
broker
= $900
Amount Paid = $100
Amount Paid = $100
Amount Paid = $100
Sold for $1,500
Sold for $500
BUYING STOCK
SELLING STOCK
Amount owed to broker = $900
Loss = $500
The Stock Market Crashes
October 29, 1929 (Black
Tuesday)
• Shareholders sell
frantically; millions of
shares have no buyers
• People who bought on
credit left with huge debts
• Others lose most of their
savings
The Great Depression
 Great Depression: economy plummets,
unemployment skyrockets
 1929–1940
 Factors leading to Great Depression:
 tariffs, war debts, farm problems, easy credit,
income gap
Bank and Business Failures
 People panic, withdraw $$ from banks
 Banks that invested in stocks fail;
people lose $
 1929-1932: gross national product cut
nearly in ½
 90,000 businesses go bankrupt
 1933: 25% of workers jobless; those
with jobs have hours and pay cut
Worldwide Impact
 Great Depression limits U.S.
ability to buy European goods
 Hawley-Smoot Tariff Act:
highest protective tariff in U.S.
history
 International trade drops;
unemployment soars around
world
Social Effects of the Depression
• People give up health
care, college, put off
marriage & children –
all cost $$
• 1928–1932: suicide rate
rises over 30%
• Admissions to state
mental hospitals triple
Hoover’s Economic Theories
• Many think depression is normal part of business cycle
• President Hoover says economy is still okay
• Gov’t should encourage cooperation between competing
groups
• People should take care of their own families, not depend
on gov’t
Hoover Tries Reassurance
 Asks business, banking, and labor leaders to solve
problems
 Creates organizations to help private charities raise
money for poor
 “Boulder Dam” built on the Colorado River
 Provides electricity, flood control, and water to states on
river basin … and provides JOBS
 Later renamed Hoover Dam
Election of 1932
 Democrats nominate NY Governor Franklin Delano
Roosevelt
 FDR wins by overwhelming majority
The New Deal
 New Deal: FDR’s plan for economic recovery and reform
 The Hundred Days – passes over 15 New Deal laws in
first 100 days in Office
Example:
 Emergency Banking Relief Act allows Treasury Dept. to
inspect banks
 Decide which are failing, need loans, or are sound
 Revives public confidence in banks
Fireside Chats
 Gave “fireside” radio addresses explaining New Deal acts
 Discusses need for public support of gov’t and banks
 People feel a connection with President and gain faith in
New Deal
Regulating Banking and Finance
 Glass-Steagall Act establishes Federal Deposit Insurance
Corporation (FDIC)
 insures individual bank accounts, regulates banking practices
 Federal Securities Act: companies must give all information
on stocks
 Securities and Exchange Commission (SEC) created to
regulate stock market
 Federal Housing Administration (FHA) gives loans for
mortgages, repairs
Adding to “Alphabet Soup”
 Civilian Conservation Corps - public works jobs for
young men
 Agricultural Adjustment Act (AAA) raises food
prices, lowers supply
 Tennessee Valley Authority (TVA) creates jobs
renovating, building dams
 Civil Works Administration - builds rural schools,
pays teachers
Opposition to the New Deal
 Deficit spending: spending more $$ than gov’t
takes in
 Funds New Deal
 Policy still used today
 Liberals: New Deal doesn’t do enough to help
poor, fix economy
 Conservatives: New Deal used to control
business, socialize economy
The Second Hundred Days
• FDR launches second phase  more relief for
farmers, workers
• 1936: FDR reelected, Democrats win large majorities in
both houses
• First time most African Americans vote Democratic
Improving Labor
 1935: Social Security
Act creates Social
Security system
 insurance for retirees 65
or older
 unemployment
compensation
 aid to disabled, families
with children
The New Deal Ends
 1939: New Deal over (mainly for $$ reasons)
 Supporters: FDR helped country recover from
economic difficulties
 Conservatives: FDR made federal gov’t too large
 Liberals: FDR didn’t do enough to end inequalities
Government’s New Role
 FDR expanded power of president and federal gov’t
 FDIC still protects investors; SEC still regulates
investments and monitors stock market
 New Deal does not end Depression
 Federal gov’t goes deeply into debt to create jobs and give
aid
 Massive spending on equipment/supplies for WWII
ends Depression
Depression in Rural America
• 400,000 farms lost to foreclosure
 Many become tenant farmers –rent land from someone
else
 Farmers in Great Plains exhausted land through
overuse
 Drought and windstorms hit make problem worse
 Dust Bowl: area from North Dakota to Texas hardest
hit
 Many families migrate to Pacific Coast states
The Black Blizzard
http://www.history.com/topics/dustbowl/videos#black-blizzard
FDR’s Fireside Chat on the Dust Bowl
http://www.history.com/speeches/fdrs-fireside-chaton-dust-bowl#fdrs-fireside-chat-on-dust-bowl