Ministry of Education and Science of the Kyrgyz Republic
KYRGYZ NATIONAL UNIVERSITY
named after J. Balasagyn
Faculty of Foreign Languages
Student’s independent work
Theme : The Great Depression in the USA
Anaraly kyzy Uulbala .
Group: ппа - 2 - 19
(1 ) .
...
Checked: Nurjamal Imashbekova
Bishkek-2020
Great Depression in the US.
Introduction
1. The Beginnings of the Great Depression
2. The stock market crash
3. Hoover's response to the Depression
4. The election of 1932
5. New Deal
6. Great Depression Ended.
One reason to study the Great Depression is that it was by far the worst economic
catastrophe of the 20th century and, perhaps, the worst in our history. Between
1929 and 1933, the quantity of goods and services produced in the United States fell
by one-third, the unemployment rate soared to 25 percent of the labor force, the
stock market lost 80 percent of its value and some 7,000 banks failed. At the store,
the price of chicken fell from 38 cents a pound to 12 cents, the price of eggs dropped
from 50 cents a dozen to just over 13 cents, and the price of gasoline fell from 10
cents a gallon to less than a nickel. Still, many families went hungry, and few could
afford to own a car. Another reason to study the Great Depression is that the sheer
magnitude of the economic collapse and the fact that it involved every aspect of our
economy and every region of our country makes this event a great vehicle for
teaching important economic concepts. You can learn about inflation and deflation,
Gross Domestic Product (GDP), and unemployment by comparing the Depression
with more recent experiences. Further, the Great Depression shows the important
roles that money, banks and the stock market play in economy US.
Causes of the Great Depression in the United States
From the point of view of economic theory, the Great Depression of 1929 in the
United States came as a result of overproduction of goods and a lack of money
supply to buy these very goods. Since money was tied to gold, and the amount of
this metal was limited, there was a shortage of money, and then a shortage of
effective demand for goods and services. Further along the chain, the “domino
principle” works: a sharp drop in prices (deflation) for goods, bankruptcies of
enterprises, unemployment, protective duties on imported goods, a drop in consumer
demand and a sharp drop in living standards.
The beginning of the Great Depression in the United States is considered October
29, 1929, the so-called "Black Tuesday". The stock market crashed, with stocks
dropping $ 10 billion in one day, which meant the disappearance of $ 10 billion of
credit money. Because of this fall in the stock market, 20-25 million people in the
United States suffered losses.
There is another point of view about the causes of the Great American
Depression. The Great Depression was preceded by the explosive growth of the
American economy. Thus, from 1917 to 1927, the national income of the United
States increased almost threefold. The conveyor production was mastered, the stock
market developed rapidly, the number of speculative transactions grew, and real
estate rose in price. The increase in the production of goods required an increase in
the money supply, and the dollar was tied to gold.
The Beginnings of the Great Depression
The stock market crash of October 1929 marked the beginning of the worst
depression in American history, from which the country did not really begin to
rebound until the start of World War II. The human toll of the economic collapse is
difficult to calculate. By 1933, more than 13 million Americans were out of work,
tens of thousands of business had failed, and the number of farm foreclosures grew.
The problems of agriculture were made worse by several years of drought that turned
a good part of the Great Plains into a dust bowl and triggered an internal migration
of destitute farmers to California. Blamed for the Depression, the Republicans lost
control of both Congress and the White House for almost two decades. Elected in a
landslide in 1932 for the first of his four terms, Franklin Roosevelt tried to bring the
country out of the Depression through a combination of deficit spending and federal
programs known as the New Deal.
Even before the stock market crash, there were signs that the prosperity of the
1920s was on shaky ground. As early as 1927, business inventories began to rise as
consumer spending declined. The Federal Reserve Board tried to curb speculation
by raising interest rates in July 1928, but the banks continued to make questionable
loans. Agriculture had been depressed since the end of World War I, and both
industrial production and the employment level dipped in mid 1929. The warning
signs were there but went largely unheeded by the government and public alike.
The stock market crash.
Stocks were bought on credit like many other commodities in the '20s. Millions of
investors paid as little as 25 percent of the face value of a stock, and paid off the
balance when the stock was sold after the price went up. This practice of buying on
margin contributed to the rampant speculation in the market. Americans who had no
knowledge of what to do in the market put their money in “investment trusts,” a
forerunner of today's mutual funds, and let professionals determine which stocks to
buy. Everybody profited as long as prices continued to go up, and the market value
of stocks did climb from $27 billion to $87 billion between 1925 and 1929.
Stock prices began to decline in early September 1929, however. On October 24
(known as Black Thursday) prices fell sharply as investors unloaded their stocks.
The following Tuesday, 16 million shares were sold — a record at the time — and
the market dropped 43 points. Brokers called in their margin debts, which few could
pay, and people who had been millionaires on paper (because of the value of the
stock they held) became paupers overnight. Stories of ruined men jumping to their
deaths from their office windows underscored just how terribly the crash affected
investors. Despite pronouncements by President Hoover, John D. Rockefeller, and
other business leaders that the economy was fundamentally sound, it was impossible
to stem the panic in the market. By the end of October, $30 million worth of stock
had vanished.
In the wake of the crash, caution replaced speculation in how people spent their
money, which in turn affected the ability of the economy to recover. Installment
buying in the '20s had masked the fact that most Americans did not earn enough to
purchase the number of goods being produced. As consumer spending declined,
companies cut back production and fired employees. Automobiles and construction,
two of the boom industries of the 1920s, were among the first sectors of the economy
hit. By 1933, about a quarter of the labor force was out of work. The nation's gross
national product, the total value of goods and services, fell by more than 40 percent
between 1929 and 1932. As borrowers defaulted on their loans, banks were unable
to pay off depositors and were forced to close. Millions in savings were lost as a
result of the banking crisis. Additionally, farm prices continued their decade‐long
fall. Wheat that had sold for more than two dollars a bushel in 1919 was worth just
over 30 cents in 1932. Even as thousands in the cities stood in bread lines and waited
in soup kitchens for food, some farmers burned their crops and poured milk on
highways as a form of protest and in a desperate attempt to drive prices high enough
to cover their costs.
Hoover's response to the Depression.
Hoover's response to the Depression. Direct federal relief to the unemployed ran
counter to Hoover's strong beliefs about the limited role of government. As a result,
he responded to the economic crisis with a goal of getting people back to work rather
than directly granting relief. The President's Emergency Committee for Employment
(later renamed the President's Organization for Unemployment Relief) was
established in October 1930 to coordinate the efforts of local welfare agencies. As
the Depression worsened, however, charitable organizations were simply
overwhelmed by the magnitude of the problem, and Hoover tried new ideas to
stimulate the economy. The Reconstruction Finance Corporation (RFC) (1932)
provided railroads, banks, and other financial institutions with money for loans, and
the Glass‐Steagall Act (1932) made getting commercial credit easier and released
$750 million in gold reserves for additional business loans. The Emergency Relief
and Construction Act (1932) provided funds to the RFC to make loans for relief to
the states and included additional money for local, state, and federal public works
projects.
Despite Hoover's efforts to revitalize the economy, the public blamed him for the
Great Depression, calling the tarpaper‐shack shantytowns “Hoovervilles” and empty
pockets “Hoover flags.” One group that thought it deserved better from the
government — World War I veterans — made its opinions known in a dramatic way.
In 1924, Congress had approved a cash disbursement to veterans that was due in
1945. During the spring of 1932, 15,000 veterans marched on Washington
demanding an early payment of the bonus. When the Senate failed to approve a
bonus bill, most of the veterans decided to go home. The 2,000 who remained
encamped at Anacostia Flats and were forcibly removed by the Army at Hoover's
direction at the end of July. The troops were under the command of General Douglas
MacArthur and led by such officers as George Patton and Dwight Eisenhower. The
spectacle of soldiers confronting unarmed veterans and their families with bayonets,
tear gas, machine guns, and tanks did little for Hoover's popularity or reelection
chances.
The election of 1932.
The election of 1932. With a noticeable lack of enthusiasm, the Republicans
nominated Hoover for a second term. The Democrats, confident of victory, chose
New York Governor Franklin D. Roosevelt. A distant cousin of Theodore Roosevelt,
FDR (as he was popularly known) had served as Assistant Secretary of the Navy
under Wilson and had been nominated as the 1920 Democratic vice‐presidential
candidate largely on the basis of his name. In 1921 Roosevelt was stricken with
polio, which left him paralyzed from the waist down. In 1924 he began his political
comeback when he gave the keynote address at the Democratic convention, and in
1928 and 1930 he was elected governor of New York.
During his presidential campaign, although he promised the American people a
“new deal,” Roosevelt did not outline a clear and specific program for responding to
the Depression. Instead, his message was a combination of vague liberal and
conservative principles. Roosevelt talked about helping “the forgotten man at the
bottom of the economic pyramid” and suggested that the government was
responsible for a more equitable distribution of wealth. At the same time, he also
called for reduced federal spending and a balanced budget. Roosevelt was obviously
extremely cautious and, given how unpopular Hoover was, the election was
Roosevelt's to win. The results were a Democratic landslide: Roosevelt received
more than 57 percent of the popular vote and 472 electoral votes, and the Democrats
gained control of both houses of Congress with substantial majorities.
The New Deal.
The New Deal Roosevelt had promised the American people began to take shape
immediately after his inauguration in March 1933. Based on the assumption that the
power of the federal government was needed to get the country out of the depression,
the first days of Roosevelt's administration saw the passage of banking reform laws,
emergency relief programs, work relief programs, and agricultural programs. Later,
a second New Deal was to evolve; it included union protection programs, the Social
Security Act, and programs to aid tenant farmers and migrant workers. Many of the
New Deal acts or agencies came to be known by their acronyms. For example, the
Works Progress Administration was known as the WPA, while the Civilian
Conservation Corps was known as the CCC. Many people remarked that the New
Deal programs reminded them of alphabet soup.
By 1939, the New Deal had run its course. In the short time, New Deal programs
helped improve the lives of people suffering from the events of the depression. In
the long run, New Deal programs set a precedent for the federal government to play
a key role in the economic and social affairs of the nation.
Great Depression Ended.
It is difficult to say exactly when this terrible crisis ended, but many analysts
believe that with the entry of the United States into World War II. Many firms
received serious contracts, and the military-industrial complex was fully operational,
since America produced weapons not only for its own use, but also for export, which
was only worth the Lend-Lease program. After all, under this program alone, the
United States supplied products worth more than $ 50 billion. By the end of 1941,
before American entry into the war, defense spending and military mobilization had
started one of the greatest booms in American history thus ending the last traces of
unemployment.
Conclusion
I think that the Great Depression was heavier in the booming countries during
these years. During most of the 1920s, the United States economy grew Many
people invested their money They bought stocks in companies A stock is a small
part of a company The value of stock goes up when a company does well The value
of stock goes down when a company does poorly. Then stockowners lose money,
By the end of the 1920s, the economy had started to slow down. In 1929, the value
of many stocks quickly dropped. The American stock market crashed. Stockowners
were frightened. Many stocks became worthless. Thousands of people lost all of
their money. The economy became even weaker. Factories did not need many
workers. Businesses closed. Many people lost their jobs, so unemployment went up.
Some families had to give up their homes Each day, hungry people waited for free
food at community kitchens. Many farmers did not make enough money, so they
went out of business. In the early 1930s, almost no rain fell in the Great Plains
Farmers' lives became even harder. The soil turned to dust. This area was called the
Dust Bowl. This time of hardship is known as the Great Depression. It was the worst
depression in United States history.
In 1932, Franklin D. Roosevelt became president. He wanted to stop depression.
Roosevelt launched new programs to help Americans. He called these programs
"New Deal". Congress quickly passed the programs into law. Some programs
provided people with food and shelter. The Public Works Authority (PWA) hired
people to build dams and improve roads and parks. The New Deal did not end the
depression, but gave people new hope.
Glossary
stock market - noun, a place where people can buy and sell shares of a company's
stock.
unemployment noun, the number of people without a job.
Depression noun, a period when many people can't find work, and many others have
no money to keep businesses going