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The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
The Great Depression And The New Deal
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The Great Depression And The New Deal

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  • 1. The Great Depression and The New Deal: 1929-1939
    Understanding Fact and Fiction by Mr. Shore
  • 2. October 24, 1929: Wall St. Earthquake
    Did the Stock Market Crash really reflect a meltdown of the real economy?
    Real output had not changed and was, in fact, on a growth path
    Interest rates had been kept low as a matter of Fed policy inviting speculation and credit
    Levels of debt had risen in the economy
    Protectionism and tariffs hurt US farmers and international trade
  • 3. The General Business Cycle
    Peak, Recession, Trough, Recovery…
    At the peak, the economy usually has “asset bubbles” or overinvestment in land,factories, railroads, “dotcom” companies, housing…etc.
    At the peak, loans are made to marginal borrowers
    The market “corrects” for these bad investments and loans after roughly a one year period of higher unemployment and hardship
  • 4. Hoover Makes Matters Worse
    Disastrous passage of the Hawley-Smoot Tariff (1930)
    Higher costs for Americans
    Less American exports and export-based jobs
    Trade war with Europe
    Both the US and Europe sink into a deeper downturn
    Debt Moratorium signals “insolvency” of the financial system to many observers
  • 5. Hoover Tries a “Bailout”
    Reconstruction Finance Corporation (RFC) created to prop up failing railroads, banks, life insurance companies and other financial institutions
    In spite OR because of all the government policies through 1932, that year was the worst year of the Depression
    1932 was also an Election Year
  • 6. Hoover & FDR: The Pursuit of Bad Policy
    “To insist on balancancing the budget as recession looms by reducing spending or increasing taxes, would mandate a contractionary policy that would undoubtedly worsen the economic situation and thus ultimately increase the deficit. This is essentially what happened in the early 1930s. Many economists believe contractionary policies aimed at balancing the budget turned what probably would have been a modest recession into the Global Depression” –Stone, CoreEconomics, p.602
  • 7. Turning Recession into Depression
    From 1929 to 1933, money supply in circulation fell by 27%
    1930 and 1931 largest peacetime tax increase in the history of the United States
    Smoot-Hawley
    Public works programs prevented or delayed necessary labor market adjustments
    Price and wage controls under the NRA from 1933 to 1935 massively distorted relative market prices and thus investment
    Fed increased bank-reserve requirement three times in 1936 and 1937 leading to a deeper recession in 1937-1938
  • 8. What made this downturn different?
    Stock Market PANIC
    Government tax INCREASES and monetary CONTRACTION
    Hoover appears ineffective and “out of touch”
    The American economic meltdown becomes a global meltdown
  • 9. FDR and “The New Deal”
    FDR beats Hoover in a landslide in 1932
    Bitter relations between Hoover and FDR
    FDR—cousin of Teddy Roosevelt.
    FDR was VP candidate with James Cox at top of Democratic ticket against Warren Harding
    FDR struck with polio and paralyzed from waist down
    FDR was a gifted orator, charismatic and a pragmatist in dealing with issues
  • 10. The Three “R’s” of the New Deal
    Relief
    Recovery
    Reform
  • 11. Relief
    Federal Emergency Relief Administration—grants to states and local government to operate soup kitchens and other services for the unemployed and homeless
    Public Works Administration (PWA)—Money to build roads, bridges, dams and other construction projects
    Civilian Conservation Corps (CCC)—employed young men on projects on federal lands
  • 12. Relief (cont)
    Tennessee Valley Authority (TVA)—build dams, operate electric power plants, control flooding and erosion, and manufacture fertilizer
    TVA sold electricity to residents of the region well below private power company rates
  • 13. Relief (cont)
    Works Progress Administration (WPA)—provided jobs to 3.4 million men and women in public works and in the arts
    Resettlement Administration (RA)—loans to sharecroppers, tenants and small farmers. Also provided federal camps to house migrant workers
  • 14. Recovery
    Emergency Banking Relief Act—authorize federal government to supervise management of bank finances and to permit temporary “bank holidays”
    Federal Deposit Insurance Corporation (FDIC)—guarantees deposits up to $5000
    Home Owners Loan Corporation (HOLC) –refinancing of small homes to prevent foreclosures
    Farm Credit Administration—low interest loans to prevent foreclosures of farm property
  • 15. Recovery and the Constitution
    More extraordinary was the National Recovery Administration (NRA) set codes for wages, hours of work, level of production and prices of finished goods
    NRA suspended anti-trust law
    NRA gave workers the right to organize and bargain collectively
    Companies were encouraged to be part of the NRA and to display the NRA seal in their business
    Supreme Court finds the NRA is unconstitutional in Schechter v. U.S.
  • 16. Recovery & The Constitution (cont)
    Agricultural Adjustment Administration (AAA) encouraged farmers to reduce production, increase price and subsidized farmers to NOT grow
    The AAA was declared unconstitutional
  • 17. FDR tries to “Pack the Court”
    Judicial Reorganization bill in 1937
    President would be authorized to appoint an additional justice to the Supreme Court for each justice over 70.5 years old
    FDR would have been able to appoint six justices to create a Supreme Court of 15
    Congress—including a majority of Democrats—opposes Roosevelt’s plan
  • 18. Reform
    National Labor Relations (Wagner) Act—guarantees workers’ right to join a union and to bargain collectively
    Wagner Act establishes National Labor Relations Board
    Rural Electrification Administration (REA)—loans for electrical cooperatives to supply power in rural areas
    Tax increases on the wealthy and on capital gains
    SOCIAL SECURITY ACT
  • 19. More New Deal Programs
    Civil Works Administration—temporary construction jobs
    Securities and Exchange Commission (SEC)—regulate the stock markets
    Federal Housing Administration (FHA)—insuring bank loans for building new homes and repairing old ones
    Dollars were no longer redeemable in gold
  • 20. The Unions
    Union membership went from less than 3 million to over 10 million in the 1930’s
    Congress of Industrial Organizations (CIO)—unskilled workers in the auto, steel and textile industries
    Strikes were common during the Depression
    Passage of the Fair Labor Standards Act which established a minimum wage, maximum workweek, child-labor restrictions
  • 21. The Depression Deepens: 1937-1938
    Social Security tax reduced consumer spending
    Roosevelt called for measures to balance the budget and cut spending
    Annual balanced budgets can exacerbate cyclical trends in the economy
  • 22. Criticism of the New Deal
    Sweeping new powers given to government
    Centralization of government
    Undermining of limited, constitutional nature of American republic
    Deficit spending
    Overregulation of business
    Too much power to unions
    Even Democrats Al Smith and John Davis join American Liberty League because of fear that FDR is moving country toward socialism
  • 23. The Demagogues
    Father Coughlin—National Union for Social Justice. Called for inflated currency and nationalizing the banks. He was anti-Semitic and pro-Fascist.
    Huey “Kingfish” Long—a Senator from Louisiana and former Governor, he proposed a “Share Our Wealth” program to guarantee a minimum income to every family by taxing the rich.
  • 24. New Deal Initiatives End: 1938
    Many lost faith in government proposals after the Recession in 1937
    Court packing fight hurt FDR’s prestige
    By 1938 foreign policy concerns in Europe began to take the spotlight off the economy
  • 25. Life During the Depression
    “Depression mentality”
    Women
    Dust Bowl Farmers
    African Americans
    Native Americans
    Mexican Americans

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