Great Depression
Contents
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Causes of the Depression
President Hoover
Dust Bowl
Life During the Depression
Election of 1932
New Deal
Comparing the Presidents
Impact of the Depression
Causes of the Great Depression
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5.
Stock Market Crash of 1929
Bank Failures
Reduction in Purchasing Across the Board
American Economic Policy with Europe
Drought Conditions
1. Stock Market Crash of 1929
• http://www.history.com/topics/great-depression/videos/1929-stockmarket-crash
• Black Tuesday (Oct. 29, 1929)
– Market crashes, and 16.4 million shares were traded, beating the record of
12.9 million shares traded on Black Thursday. That was worth $14 billion, or
$185 billion in 2011 dollars.
– That was worth $14 billion, or $185 billion in 2011 dollars.
• The crash on Black Tuesday set the direction of the stock market, and
then the economy, for the next decade.
• In just four days, the stock market dropped 25%. It lost $30 billion, or 40%,
in market value.
– This was ten times more than the 1929 Federal budget, and more than the
U.S. had spent in World War I.
• By November 13, the day when stock prices hit their lowest point in 1929,
over $100 billion had disappeared from the American economy.
– In today's terms, that was worth $1.3 trillion.
1. Stock Market Crash of 1929
• Prominent Bankers attempt to stop crash.
– The prominent bankers of the day -- Morgan Bank, Chase
National Bank, and National City Bank of New York -intervened.
– The banks bought shares of stocks in an attempt to restore
confidence in the stock market.
• However, this had never happened, and the banks' intervention
signaled other investors to continue to sell, creating continued
panic.
• Black Tuesday is widely regarded as the start of the
Great Depression, because it signaled a complete loss
in confidence in the U.S. financial system.
1. What Caused Black Tuesday?
• Part of the panic that caused Black Tuesday resulted from how investors
played the stock market back in the 1920s.
– They didn't have as much access to information as they do today.
– Stock prices weren't on the computer, they were shown via a tickertape
machine. This machine printed stock prices on a strip of paper.
• As stock prices dropped on Black Tuesday, panic ensued because no one
knew how bad it was.
– The tickertapes literally could not keep up with the pace of falling stock prices.
– By the time someone purchased a certain stock, the prices would have
inevitably changed, and the value would have dropped.
• The more shares of a stock that are purchased, the less valuable they are.
• The other reason for the panic was a new way that stocks were bought.
– Many investors had placed huge stock orders using money they borrowed
from their brokers, called buying on margin.
– When stock prices fell, the brokers called in the loans. Many people found
their entire life savings wiped out to pay off the loan
1. Effects of Black Tuesday on the
Overall Economy
• Black Tuesday's losses alone were not enough to cause
the Great Depression.
• However, psychologically, it destroyed confidence in the
economy.
– That's because, in those days, people believed the stock market
was the economy. What was good for Wall Street was thought
to be good for Main Street.
• That loss of confidence created a run on the banks.
– People withdrew all their savings.
– The banks didn't have enough cash on hand, and were forced to
close.
– When they reopened, they only gave savers ten cents for every
dollar.
• There was no Federal Deposit Insurance Corporation to insure
people's savings.
1. Effects of Black Tuesday on the
Overall Economy
• Investors abandoned the stock market and started putting
their money in commodities.
– Gold prices soared. At that time, the U.S. was on the gold
standard, and promised to honor each dollar with its value in
gold.
– However, as people began turning in dollars for gold, the U.S.
government began to worry it would run out of gold.
• The Federal Reserve thought it would come to the rescue
by increasing the value of the dollar.
– How did it do this? By raising interest rates, which reduced
liquidity to businesses.
– Without funds to grow, businesses started laying off
employees, leading to a vicious downward economic spiral
that became the Great Depression.
2. Bank Failures
• Throughout the 1930s over 9,000 banks failed.
– Bank deposits were uninsured and thus as banks
failed people simply lost their savings.
• Surviving banks, unsure of the economic situation
and concerned for their own survival, stopped
being as willing to create new loans.
– This exacerbated the situation leading to less and less
expenditures.
• As people had less money, whether from their
bank closing (and savings gone) or from their
inability to get loans, they could spend less.
3. Reduction in Purchasing Across the
Board
• With the stock market crash and the fears of further
economic woes, individuals from all classes stopped
purchasing items.
• This then led to a reduction in the number of items
produced and thus a reduction in the workforce.
• As people lost their jobs, they were unable to keep up
with paying for items they had bought through
installment plans and their items were repossessed.
– More and more inventory began to accumulate.
• The unemployment rate rose above 25% which meant,
of course, even less spending to help alleviate the
economic situation.
4. American Economic Policy with
Europe
• As businesses began failing, the government
created the Smoot-Hawley Tariff in 1930 to help
protect American companies from companies
abroad.
• This charged a high tax for imports thereby
leading to less trade between America and
foreign countries along with some economic
retaliation.
• If an American company relied upon foreign
trade, they were in trouble.
5. Drought Conditions
• While not a direct cause of the Great
Depression, the drought that occurred in the
Mississippi Valley in 1930 was of such
proportions that many could not even pay
their taxes or other debts and had to sell their
farms for no profit to themselves.
• The area was nicknamed "The Dust Bowl."
President Hoover
Herbert Hoover
• President 1929-1933
• Hoover’s approach to the depression
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Key to recovery was confidence
Blamed it on world-wide economic problems
Called for voluntary action by businesses
Unwilling to compromise political ideas
Rugged Individualism
Laissez-faire economics
• Public began to blame Hoover for the deepening
depression
– 1930 mid-term election house majority went to
Democrats and Senate control was only maintained by
republicans by one seat.
Hoover’s Actions
• After the mid-term election Hoover began to take
a more active approach
– Created jobs through public works projects
• Building –buildings, roads, parks, and dams
• 1930- building of Boulder Dam (Hoover Dam)
– http://www.history.com/shows/america-the-story-ofus/videos/the-hoover-dam
– Trickle Down Economic policies
• Hawley-Smoot Tariff (1930)
• The Bonus Army (1932)
– http://www.pbs.org/wgbh/amex/macarthur/peopleev
ents/pandeAMEX89.html
The Bonus Army (1932)
President Hoover
• President Hoover believed that too much intervention on the part
of the federal government during the Depression would destroy
American individuality and self-reliance, and that public-private
cooperation was the way to achieve high long-term growth.
• Hoover tried to combat the ensuing Great Depression with
moderate government public works projects such as the Hoover
Dam.
• Unfortunately, the record tariffs imbedded in the Smoot-Hawley
Tariff and aggressive increases in the top tax bracket from 25% to
63%, coupled with increases in corporate taxes yielded a "balanced
budget" in 1933, but seriously hindered economic recovery.
• Instead, the economy plummeted and unemployment rates rose to
afflict one in four American workers. This downward spiral set the
stage for Hoover's defeat in 1932 by Democrat Franklin D.
Roosevelt, who promised a New Deal.
The Dust Bowl
Sample Slide with Image
1) Describe what you see in this picture.
2) When and where do you think this picture was taken?
20
The Dust Bowl
• The Dust Bowl refers
to parts of the Great
Plains that
experienced the most
intense soil erosion
and dust storms of the
1930s.
• This region included
parts of Oklahoma,
Texas, Kansas,
Colorado, and smaller
parts of New Mexico
and Nebraska.
The Dust Bowl
• There were more than
300 dust storms, also
known as “Black
Blizzards,” between
1933 and 1938.
• These storms often
featured fast moving
clouds of dust several
miles wide that covered
farms and homes,
destroyed crops, and
made people sick.
The Dust Bowl
• Many people left the region
hit by the Dust Bowl. They
abandoned their homes and
looked for work in Western
states, such as California.
Migrant family in San Francisco, 1935
• However, many stayed
behind and attempted to
maintain their lives and
farms.
Farmer leveling dust hills in Texas, 1938
The Dust Bowl Summary
• 1931-1940
• What was it?
– Prolonged drought and dust storms “black blizzards”
• Causes
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Drought
Removal of prairie grass
Over use of soil
Soil erosion
Drought
Winds
• http://www.history.com/shows/america-thestory-of-us/videos/america-black-blizzard
Life During the Depression
Social Effects
• What people faced
– Evictions and homelessness
• Hoovervilles
– Hunger
– Little to no government help
• Why didn’t Hoover want to give direct relief?
• People’s Health
– Psychological
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Depression
Suicide
Low self-image (men)
Humor- you laugh or you cry
Lasting psychological effects
– Physical
• Starvation
• Sleepy
• Malnutrition
– Dropped out of school
» Disease (tuberculosis) tripped in high schools many had to close
• Family life
– Moved in with family in crowded apartments or
small homes
– Men
• Suffered from low self-image when they could not
provide for family
• Many abandoned their families
– Women
• Married women were fired
• Could only find “women’s work”
• Left to care for family when men abandoned them
• Making ends meet
– Cities
• many former businessmen sold apples or pencils on the
street to make money.
• Begged for food
• Fought over trash
• Breadlines and soup kitchens
– Country
• Grew food
• Competition for jobs
– Asians deported
– African-Americans
• 56% unemployed
• Lynching went up
• Vagrants
– Hoboes
– Young people ride the rails
The Empire State Building a Symbol of
Hope
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Opened May 1, 1931
Developed by John J. Raskob
Cost $41 million
Construction gave 2,500- 4,000 people a job each
day
• World’s tallest building
– 1,250 feet
– 102 stories
– 67 elevators that went 1,000 feet per minute
• First Sunday it was open 4,000 people paid $1 to
go to the top
Election of 1932
Election of 1932
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FDR
Democrat
Personal background
Optimistic/positive
“can do attitude”
Government helps people
Promised America a new
deal
89% electoral votes
57% popular vote
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Hoover
Cold/heartless
Rugged Individualism
Reserved cautious
11% electoral
40% popular
FDR Takes Office
• The 20th amendment- moved inauguration to
January to prevent lame duck president
• The First couple sets out to rebuild the public’s
hope and confidence in the president
– 2nd Bonus Army
– Fireside chats
• The 21st amendment- repealed the 18th
amendment
The New Deal/New Deal Programs
The New Deal
• The three R’s of the New Deal
– Relief, Recovery, Reform
• The first 100 days
– Pushed through program after program
• Alphabet soup
• https://www.youtube.com/watch?v=WvcWeN
f9g6A
• http://www.history.com/topics/newdeal/videos/the-new-deal
Restoring Confidence in Banks
• Bank Holiday- March 5, 1933
– Closed banks for 4 days
• Emergency Banking Act
– March 9, 1933
– Government could inspect financial health of the
banks
– 2/3 reopened by March 15th
• Glass-Steagall Banking Act (1933)
– Established Federal Deposit Insurance (FDIC)
Stock Market
• Federal Securities Act – May 1933
– Required companies to give information about
their finances if they sell stocks.
• Securities and Exchange Commission (SEC)1934
– Regulated the stock market
– Federal Reserve Board
• Can regulate the buying of stocks on the margin
Money
• Removed money from the gold standard
• Fiat Money- money backed only by the
governments promise that it is good
• Wanted to devalue the dollar
– Stimulate exports
– Raise prices of crops and other products
Jobs
• Federal Emergency Relief Administration
(FERA) –May 1933
• Civil Works Administration (CWA)- November
1933
• Civilian Conservation Corps (CCC)- March 1933
Economy
• National Industrial Recovery Act- (NIRA)- June
1933
– National Recovery Administration (NRA)
• Public Works Administration (PWA)
Homeowners and Farmers
• Homeowners
– Homeowners’ Loan Corporation (HOLC)
– Federal Housing Administration (FHA)
• National Housing Act- 1934
• Farmers
– Agricultural Adjustment Administration- (AAA)May 1933
– Tennessee Valley Authority (TVA)- May 1933
FDR’s Advisors
• The “Brain Trust”
• Appointments
– Women
• Frances Perkins
– African-Americans
• Mary McLeod Bethune
• The “Black Cabinet”
• Eleanor Roosevelt
Issues with the New Deal
The New Deal Stumbles
• Failed to bring significant economic change
• Gave increased power to the federal
government
• Supreme Court Rulings
– 1935 NIRA
– Taxes and the AAA
The Second New Deal
• Works Progress Administration (WPA)-1935
– WPA and the arts
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Federal Writers’ Project
Federal Music Project
Federal Art Project
Federal Theater Project
• Trouble with the AAA
– Resettlement administration- 1935
• Farm security Administration
• Rural Electrification Administration (REA)
• Wagner Act-1935
– National Labor Relations Board (NLRB)
• Social Security Act-1935