The Great Depression and New Deal
1928-1941
 The 1920’s were a time of superficial prosperity
 Businesses were doing well
 Wages were increasing
 People bought all kinds of “luxury” items
 Cars, toasters, washers, vacuums, sewing
machines
 People thought the good times would continue
forever and bought fancy items on credit or with
installment plans, assuming they would just pay it
later.
 As the 1920s advanced, economic prosperity slowed, but
few noticed
1. Industries were in trouble
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Railroads, lumbering and mining industries were no
longer making profits
Companies had to start laying people off
People without jobs do not have money to spend,
which hurts other businesses
People were also laid off because a lot of companies
began using machines to do the work
2. Farmers were in Debt
 During WWI, farmers produced a lot and sold a lot
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of crops.
After WWI farmers should have slowed
production, but they didn’t and were unable to sell
all their crops.
Farmers needed money and took out loans
Many farmers never repaid their loans which
caused rural banks to fail
Many farms were foreclosed on
3. Consumers had less money to spend
 As businesses failed, wages were cut and
people could not spend money on “extra”
items.
 Since nobody was buying, more businesses
failed, causing more unemployment, which
caused even less money to be spent in stores.
4. Living on credit
 People were living above their means
 People could not afford to buy items out right so they
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paid for them on credit and assumed they would pay it
back later.
Credit Cards
Installment Plans -paying off the total cost in monthly
payments
Buying Stocks on the Margin- many wanted to invest in
the stock market, but could not afford to pay the full
amount of the stock so they borrowed from a broker
(took out a loan to pay for it)
Many couldn’t pay back the full amount of their loans
or were so strapped for cash they couldn’t spend
money on other items, which hurt other businesses,
causing more people to become unemployed.
5. Uneven distribution of wealth
 Rich got richer, poor got poorer
 Most earned less than $2,500 a
year
 Had no savings
 Relied on credit
 1928- Hoover wins the election
 Little focus on the economy
 People think the good times will continue
 People believed investing in the stock market was the
key to riches
 Dow Jones Industrial Average was high (Bull
Market)
 People began engaging in Speculation
 Buy low, sell high
 Make quick money
 Many didn’t realize the risk, thought the market
would continue to increase
 By early September 1929 many began to question the
strength of the market
 People began selling their stocks
 Black Tuesday- October 29, 1929
 Confidence in the market collapsed
 People began selling their stocks for pennies
 16 million stocks sold
 Could not pay back their loans
 Caused banks to close, by November investors had lost
30 billion dollars
 How did the stock market crash help
cause the Great Depression?
 1929-1940- time period where the economy plummeted and
unemployment rose
 Banks Failed
 People panicked and went to their banks demanding their
money
 Many banks invested the money in the stock market and
did not have the money to give back
 Many lost their entire life savings
 The government did not insure bank accounts
 By 1933-11,000 of 25,000 banks failed
 Businesses Failed
 The Gross National Product (total output of goods) was
cut from 104 billion to 59 billion
 90,000 businesses failed
 Unemployment Rose
 From 3% to 25%
 The Depression Spread throughout the world
 European nations were still trying to recover from
WWI
 Many nations relied on the U.S. for loans
 Many also relied on the U.S. to buy goods
 U.S. passed the Hawley Smoot Tariff Act
 Highest protective tariffs in U.S. History
 Designed to protect American farmers and
businesses
 It failed It stopped Europeans from buying American
goods
 Increased unemployment
 encouraged other nations to pass similar
 The Depression in Cities
 Many lost their homes, jobs
 Homelessness increased
 Shanty towns (“Hoovervilles”) emerged- little
towns consisting of shacks
 Soup kitchens
 Bread lines
 There was no direct relief for families
 Cash payment or food provided by the
government
 African-Americans and minorities were hit even
harder
 The Depression in Rural Areas
 Farms were foreclosed on
 The Dust Bowl
 Drought struck in the 1930s
 For decades farmers in the Midwest broke up farmland,
removing the protective grass covering, exposing dirt
 Leaving a lot of land unusable
 When the drought struck and winds picked up dust became
unbearable
 Hardest hit was Kansas, Oklahoma, Texas, New Mexico, and
Colorado
 Many abandoned their farms and moved to California
http://www.history.com/topics/1930s/videos#am
erica-black-blizzard
• Write a letter or diary entry explaining what life
was like during the Stock Market Crash and/or
Great Depression.
• You can portray yourself as a child, banker,
mother, the President, etc.
• ¾’s-1 page; turn in when you are finished
 Hoover tried to reassure Americans that the nation’s
economy was sound.
 Believed government’s role was to encourage and
facilitate cooperation not control it
 Americans values individualism therefore Hoover
opposed any form of federal welfare or direct relief.
 Felt it would weaken peoples self-respect
 His answer to the problem was to let individuals,
charities and local organizations pitch in and help.
 Why was Hoover reluctant to help
people during the Depression?
 Democrat, elected in the election of
1932
 Between the time of election and
the time he took office, FDR worked
to pick advisers known as the “Brain
Trust”.
I.
President Franklin D. Roosevelt,
along with his wife Eleanor, wanted
to restore the nation’s hope and
build confidence.
A. New Deal- the relief, recovery,
and reform program that changed
the role of the government to a
more active participant in solving
problems.
B. Roosevelt rallied a frightened
http://www.history.com/topics/1930s
nation in which one in four
workers was
unemployed. /videos#fdr-a-voice-of-hope
 Relief: bring immediate help to those who need it
 Recovery: “pump-priming” temporary programs to
restart the flow of consumer demand
 Reform: permanent programs to avoid situations
causing contractions and insurance for citizens against
economic disaster
http://www.history.com/topics/great-depression/videos#the-new-deal-how-does-it-affect-us-today
- Focused on relief, recovery, creation of jobs, and
stimulating the economy.
1. Banks- first step to restore nation’s confidence
 Emergency Banking Act- authorized the government
inspect the financial health of banks (closed until
passed inspection)
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Federal Deposit Insurance Corporation (FDIC)insured all bank deposits (up to $5,000)
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Roosevelt also decreased the value of the U.S.
currency by taking it off the gold standard.
- The Supreme Court struck down some of FDR’s
programs, demanding for the creation of the Second
New Deal.
 Included more social welfare benefits, stricter
controls over business, stronger support for labor
unions, and higher taxes on the rich.
 Computer lab
 Research agencies in the chart and answer the following:
1. What did it do?
2. Which R?
3. Is it still around today?
- FDR was reelected in 1936; however, he encountered
much criticism over his programs.
 FDR tried to “pack” the Supreme Court by asking
Congress if he could appoint six new justices to
replace the existing justices that were over the age of
70.
 FDR’s intention was to appoint justices who
supported his programs and ideas. (Congress did not
allow this to happen)
- A series of thirty evening radio
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http://www.history.com/topics/greatdepression/speeches#fdrs-fireside-chat-on-dustbowl
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speeches broadcasted to the American
people reassuring them that the nation
was going to recover.
-President Franklin D. Roosevelt did
this between 1933 and 1944.
-Sometimes beginning his talks with
"Good evening, friends", Roosevelt
urged listeners to have faith in the
banks and to support his New Deal
measures.
-The "fireside chats" were considered
enormously successful and attracted
more listeners than the most popular
radio shows.
- Roosevelt continued his broadcasts
into the 1940s, as Americans turned
their attention to World War II.
 In 1938, FDR scaled back on the New Deal
policies and unemployment rose again.
 Production and unemployment wouldn’t match
pre-1929 levels until the U.S. entered WWII
and industries began production of war
materials.
 However, the New Deal did provide shortterm relief to many.
 People now looked to the government for help in
times of need.
 Government is responsible for social welfare
 Thousands of federal jobs were created to maintain
new agencies.
 Government became active in settling labor disputes.
 Greatly regulated business- 40 hour work week,
minimum wage, etc.
 Ushered in an era of increased taxes paid by citizens
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http://www.history.com/topics/great-depression/videos#hoover-dam-true-giant
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http://www.history.com/topics/great-depression/videos#tennessee-valley-authority---natures-power-harnessed