Unit 7
Depression and War
1930-1945
The Great Crash
• On Thursday and Friday, October 24 &25,
1929, the trading and selling of stocks began
and the market took a slight drop.
• Over the weekend, small time investors
panicked and began selling their stocks on
Monday, October 28, 1929.
• On Tuesday, October 29, 1929, the stock
market takes a huge hit. The stock market
drops over 12%.
– Known as “Black Tuesday”
Banks Fail!
• As the market begins to crash, people panic
and make a run on the banks to withdraw
their money, thinking the banks will fail as
well.
• Because banks invested peoples money in the
stock market, the banks had no money to pay
back people.
• Banks went bankrupt and closed.
Crowds clog Wall Street during the stock market crash of 1929
Buying on Margin
• Buying stocks on credit
• High interest rates
– people couldn't pay it back
• Investor wanted to purchase $20,000 worth of
stock. They put down $2,000 (10%) of their
own money. Borrow from the bank $18,000.
Wall Street Clerks
These Wall Street clerks work long hours computing gains and losses during the market
crash of 1929.
Buying on Margin cont...
• Bank would lend with expectation that they
would not repay loan
– they would seize the stock and sell it for instant
cash
• Result – stocks were worthless
News of the Wall Street Slump
A young telephone operator at St. Phalle Limited writes share values on a blackboard as
he hears them straight from New York with the aid of a headset. Club members, who are
keeping a keen eye on the market fluctuations in the wake of the Wall Street crash, are
able to buy and sell stock straight away.
Causes of the Great Depression
• More goods and services were produced than people
were able or willing to buy
– Result – recession (a period of slow economic activity)
• Falling demand in some industries caused
unemployment
– Result – starts the multiplier effect (one person’s income is
another persons income)
• Decreases in spending by unemployed workers
caused further unemployment
Crowd After Stock Market Crash
Original caption: 10/29/1929-New York, NY: Photograph shows the street scene on Black
Thursday, the day the New York stock market crashed, and the day that led to the Great
Depression
• Banks began to close in record numbers
– Unemployed people and failing businesses
withdrew cash, lowering the reserves of the
banks.
– Businesses and unemployed were unable to pay
back loans – loans became worthless to banks
– Bank rush – depositors withdrew their money,
eventually not enough money in bank to pay all
depositors
Crowd Of People Outside Bank 1929
Original caption: 1929-Passaic, NJ: Depositors besiege Merchants Bank in Passaic NJ.
Investors Crowd Wall Street
The planked surface of Wall Street was a scene of near panic here, as hundreds of
bewildered investors milled about after the stock market crash on Black Friday. A record
16,000,000 shares changed hands that day, and the decline in stock value by the end of the
year was estimated at $15,000,000,000. Two years later, stock losses were estimated at
$50,000,000,000.
• Decreases in the money supply
– Federal Reserve raised interest rates
• Result – less money in circulation
– Federal Reserve Banks were not helping out the
banks in trouble during the Great Depression
• Result – banks failed and less money in circulation
• The Hoover Administration tax hikes
– Hoover’s tax hikes were given to balance the
federal budget instead of helping the American
people
New York Stock Exchange
New York Stock Exchange on Wall Street during the 1929 stock market crash.
Run on Bowery Savings Bank
Original caption: 1930-New York, NY- Run on Bowery Savings Bank. Photo shows depositors
lining up to withdraw their money.
Bull Market
• A long period of rising stock prices
• No one was regulating what banks and
companies were doing to make profits.
The Homeless
• People lose their homes because they could
not pay banks back.
• Homes go into foreclosure.
• Homeless people create communities called
shantytowns made out of cardboard boxes.
The Homeless cont…
• President Herbert Hoover is blamed for
economic depression, shantytowns are
sometimes called Hoovervilles.
• People looking for places to live and work
become known as hobos.
– Sneak onto boxcars of trains to get to new areas.
– Leave signs to let other hobos know if it is a good
route or bad route.
Hobo Signs
1. Good road to follow
2. Religious talk will get you a free meal
3. These people are rich (Silk hat and pile of
gold)
4. Camp here
5. You may sleep in the hayloft here
6. Warning: Barking Dog
7. House is well-guarded
8. This is not a safe place
9. Good food available here, but you have to
work for it
10. If you are sick, they'll care for you here
11. This community is indifferent to a hobo's
presence
12. Authorities are alert: Be careful
13. Officer of the law lives here
14. Courthouse, precinct station
15. Jail
16. Free telephone (Bird)
17. Beware of four dogs
18. No use going this direction
19. Dangerous drinking water
20. Doubtful
21. A judge or magistrate lives
here
Hobos Riding Freight Car to California
Several hobos ride a freight car hanging over the side while others lay in the shade
behind them. These hobos ride empty freight carts to Southern California.
To Make Matters Worse
• In the Great Plains, poor farming practices and
a severe drought caused the land to go
barren. The soil dried to dust.
• From North Dakota to Texas, pastures and
wheat fields became a giant “Dust Bowl”
• Passage of the Hawley-Smoot Tariff, a tax
increase on foreign goods, in 1930 hurt
American businesses
– Foreign countries stopped buying American
products, hurt US economy.
Dust Storms
• High winds kicked the dust up and caused
massive Dust Storms that blinded and
suffocated people.
• Most severely hit states, Texas, New Mexico,
Nebraska, and Oklahoma.
• Many people in Oklahoma packed up and
moved west to try to find a better life in
California.
– They become known as “Okies”
Trying to Escape the Depression
• Hollywood and the radio industry try to ease the
pain of the depression with entertainment.
• Walt Disney- produces the first full-length animated
film, Snow White and the Seven Dwarfs, in 1937.
• Other movies produced in the 1930s, Mr. Smith Goes
to Washington, Gone With The Wind, and The Wizard
of Oz
• Radio shows like “The Lone Ranger” and soap operas
were played.
– Named Soap Operas for their sponsors that were usually
makers of laundry soap.
Art in the Depression
• John Steinbeck- writes The Grapes of Wrath in
1939 about the story of an Oklahoma family
leaving the Dust Bowl to find a new life in
California.
• Dorothea Lange- photojournalist that takes
pictures of the people that show the true
essence of the effects the GD had on people.
Hoover Responds
• Got companies to sign a pledge to stop
slashing wages and keep factories open.
– Lasted less than a year
• Increase in public works- governmentfinanced jobs could replace some of those lost
in the private sectors.
– People hired by mayors and governors to sweep
streets.
Hoover Dam
• An attempt to get
Americans back to
work, construction
begins in 1931.
• Opens in 1936.
• Water stored used for
Nevada, California
and Arizona
Pumping Money into the Economy
• 1932, Hoover sets up the Reconstruction
Finance Corporation
– Makes loans to banks, railroads, and agricultural
institutions.
– These industries would later pay back loans to the
government.
– The RFC could not meet the demands of all
businesses.
Helping the Citizens
• Relief, money that went directly to poor
people, was needed and Hoover believed this
should come from the local and state
governments, not federal.
The Bonus Marchers
• After WWI, Congress enacted a $1,000 bonus
for each veteran that served in the war to be
distributed in 1945.
• GD hits and veterans march to Washington to
demand their Bonus and became known as
the Bonus Army.
• Congress voted down the bill to give the
veterans this money
FDR Background
• Cousin to Theodore Roosevelt
• Began political life as NY State Senator in
1910.
• In 1920, he caught polio, a paralyzing disease.
• In 1928, became governor of NY.
• Wins 1932 presidential election.
• Inaugural speech, “The only thing we have to
fear is fear itself.”
Roosevelt Takes Office
• 1932 election
– Hoover runs for re-election under the Republican
party
– Franklin Delano Roosevelt is elected as the
Democratic nominee to run for president
• FDR wins with a promise of a “New Deal” for
Americans.
The First Hundred Days
• First hundred days of Roosevelt being in office,
15 major bills were passed to help the
economy.
• The Emergency Banking Relief Act- Roosevelt
called for a national bank holiday.
• Roosevelt began “Fireside Chats”- direct
discussions on the radio to let the American
people know what he was trying to
accomplish.
New Deal
• Basic goals of the New Deal: The Three “R’s”
– Recovery
• Bring about economic recovery in the U.S.
– Relief
• Provide direct economic relief to the American people
(JOBS!)
– Reform
• Reform the system to avoid another Great Depression
in the future.
Emergency Bank Act (EBA)
1933
• By 1933, 5000+ banks had closed
• All banks were required to take a 4-day
“holiday”
• Banks were inspected to ensure they were
“sound”
• Weak banks restructured and healthy/strong
banks re-opened right away
– Restored faith in bank system
Agricultural Adjustment Act (AAA)
1933
• Farmers were paid subsidies to restrict crop
production
– Paid to not farm at times
• Government bought excess products and kept
them in reserve
– Designed to bring prices of products so farmer
could make profit
– Benefits large landowners rather than
sharecroppers
Tennessee Valley Authority (TVA)
1933
• Govt. built hundreds of dams along rivers in
the Tennessee Valley
• Designed to end erosion and promote flood
control
• Brought cheap electric power to areas which
previously had no electricity
– Provided jobs to people for construction
Relief Measures
• Works Progress Administration (WPA) 1935
– Employed over 8 million workers, built 125K
buildings; hospitals, schools, post offices, etc.
• Civilian Conservation Corps (CCC) 1933
– Put men to work and helped the environment
• Planted trees, built campgrounds, hiking trails, etc
• Avg. Pay: $35.00/month- very laborious work
Challenging the New Deal
• Roosevelt and his New Deal was criticized for
deficit spending, gov. practice of spending
borrowed money rather than raising taxes.
• Republicans thought Roosevelt went too far
with spending.
• Democrats thought he didn’t go far enough
with spending.
The Townshend Plan
• Dr. Francis Townshend believed that the gov.
should pay citizens over the age of 60 $200 a
month.
– Citizens had to retire, freeing up jobs for younger
people
– Spend check each month to boost the economy.
Huey Long
• Democratic Senator from Louisiana.
• Believed in a “Share Our Wealth” program for
everyone.
– Redistribution of wealth.
• If ran for prez. taken votes away from
Roosevelt, giving Republicans victory.
• Assassinated in 1935.
Father Coughlin
• Catholic priest with a nationally broadcasted
radio show.
• Supporter of Huey Long
• Called for heavy tax on corporations and
wealthy.
• Ideas went along with thoughts of Hitler and
Mussolini
– Anti-Semitic attacks on Jewish bankers, lost
popularity.
Reform Measures
• Tax rates for wealthy individuals and corps.
were increased under Wealth Tax Act
• Securities Act of 1933- companies selling
stocks, provide complete and accurate report
to investors.
– Securities and Exchange Commission (SEC)agency that regulates stock market and prevents
fraud.
Cont…
• Glass-Steagall Act (1933)- separate
commercial banking from investment banking.
• Federal Deposit Insurance Corporation (FDIC)provides gov. insurance for bank deposits up
to a certain amount.
– 1934-$5,000
– 1950- $10,000
– 1980-$100,000
– 2008-$250,000
The Social Security Act
• Passed in August 1935.
• Major goal- provide some security for the
elderly and for unemployed workers.
– Help citizens with disabilities
– Poor families with young dependent children
Election of 1936
• Roosevelt wins second term
• Wants to continue and expand govt. actions in
New Deal Programs.
Roosevelt’s Second Term
• Appointed Francis Perkins, the first woman to
a cabinet position, as the Secretary of Labor.
• Supreme Court wanted to strike down Social
Security Act
– Felt it was unconstitutional
2nd Term cont…
• Court Packing Plan- put age limit on SC
Justices, Roosevelt would then put judges in
SC to favor his New Deal programs.
– Violation of Separation of Powers.
• Roosevelt’s threat made SC Justices say SSA
was constitutional and was passed.
Balancing the Budget
• A mini recession occurs in 1937 when FDR
ends certain ND programs.
• People believed in a economic theory called
Keynesianism, based from John Maynard
Keynes theory that a gov. should spend
money to kick start an economy in a recession,
even if it causes a deficit.
Government’s New Role
• People rely now more on the government
than before.
– Safety-Net, safeguards and relief programs that
protect against economic disaster.
• Results:
– Larger, more expensive federal government
• Establishing the modern welfare state
– Gov. too powerful
– More people rely on gov. to help them.