The Great Depression and the New Deal


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The Great Depression and the New Deal

  1. 2. The Ripple Effect <ul><li>At first, crash only affected those heavily invested in stock market </li></ul><ul><li>It did not take long for a ripple effect to occur </li></ul>
  2. 3. How the Crash Spread <ul><li>Risky loans hurt banks </li></ul><ul><ul><li>Bank loans to high-risk businesses </li></ul></ul><ul><ul><li>Businesses unable to pay loans when stocks fell </li></ul></ul><ul><li>Consumer borrowing </li></ul><ul><ul><li>Consumers heavily borrowed to purchase goods </li></ul></ul><ul><ul><li>Consumers unable to pay when banks called in loans </li></ul></ul>
  3. 4. How the Crash Spread (cont.) <ul><li>Bank runs </li></ul><ul><ul><li>People feared banks would run out of money </li></ul></ul><ul><ul><li>Result  ran to banks to withdraw </li></ul></ul><ul><ul><li>Banks had to recall loans from borrowers </li></ul></ul><ul><ul><li>Banks could not get money fast enough </li></ul></ul><ul><li>Bank failures </li></ul><ul><ul><li>Unpaid loans + bank runs = bank failures </li></ul></ul><ul><ul><li>Thousands of banks closed </li></ul></ul>
  4. 5. How the Crash Spread (cont.) <ul><li>Savings wiped out </li></ul><ul><ul><li>Bank failures wiped out people’s savings </li></ul></ul><ul><ul><li>By 1933, money from over 9 million accounts had disappeared </li></ul></ul><ul><li>Cuts in production </li></ul><ul><ul><li>Businesses could no longer borrow $$ to produce goods </li></ul></ul><ul><ul><li>People had no $$ to buy goods anyway </li></ul></ul>
  5. 6. How the Crash Spread (cont.) <ul><li>Rise in unemployment </li></ul><ul><ul><li>Because businesses had to cut production, they laid off workers </li></ul></ul><ul><ul><li>By 1932, over 12 million unemployed </li></ul></ul><ul><li>Further cuts in production </li></ul><ul><ul><li>Unemployment + </li></ul></ul><ul><ul><li>Shrinking economy = </li></ul></ul><ul><ul><li>Less output of goods </li></ul></ul>
  6. 7. Impact on World <ul><li>International banking, manufacturing and trade made the world internationally dependent upon the US </li></ul><ul><li>US demanded France & Britain pay wartime debts while keeping taxes on imports high </li></ul><ul><li>Created a situation in which the Allies had to rely on Germany’s reparations </li></ul>
  7. 8. Underlying Causes of the Great Depression <ul><li>Stock market crash did not cause the GD </li></ul><ul><li>Main Causes: </li></ul><ul><ul><li>Unstable Economy </li></ul></ul><ul><ul><li>Overspeculation </li></ul></ul><ul><ul><li>Government Policies </li></ul></ul>
  8. 9. Unstable Economy <ul><li>Uneven distribution of wealth </li></ul><ul><li>Increase in supply, decrease in demand </li></ul><ul><li>Farmers & workers did not profit from boom </li></ul><ul><li>This all added to make it increasingly difficult for the economy to quickly recover </li></ul>
  9. 10. Overspeculation <ul><li>Too much stock bought on margin </li></ul><ul><li>Therefore, the stock market boom was based on borrowed money not real value </li></ul>
  10. 11. Government Policies <ul><li>Federal Reserve cut interest rates to stimulate economy </li></ul><ul><li>1929 – worried about overspeculation  limited US money supply (discourage lending) </li></ul><ul><li>Result = not enough $$ to help economy recover from crash </li></ul>
  11. 12. Poverty Spreads <ul><li>GD had serious social effects </li></ul><ul><li>Not long until it hit all levels of society </li></ul><ul><li>Laid off (even white collar) </li></ul><ul><li>Savings disappeared (literally) </li></ul>
  12. 13. “ Hoovervilles” <ul><li>Hardest hit = lower class </li></ul><ul><li>Many became homeless </li></ul><ul><li>Homeless built shanty towns out of cardboard or scrap materials </li></ul><ul><li>Why “Hoovervilles?” </li></ul>
  13. 14. Hooverville Children <ul><li>Many blamed President Hoover for not helping </li></ul>
  14. 15. Hooverville <ul><li>A woman describes a Hooverville in Oklahoma: </li></ul><ul><li>“ Here were all these people living in old, rusted-out car bodies,” she noted. “There were people living in shacks made of orange crates. One family with a whole lot of kids were living in a piano box.” </li></ul>
  15. 16. Drifters & Hobos <ul><li>Many homeless, jobless people became drifters or hobos </li></ul><ul><li>Hitchhiked throughout US </li></ul><ul><li>Many hitched rides and slept in open boxcars or freight cars </li></ul>
  16. 19. Farm Distress <ul><li>Low crop prices = low income for farmers </li></ul><ul><li>Many could not pay mortgage  lost farms </li></ul><ul><li>Things got worse in Midwest as the nation was hit with a terrible drought </li></ul>
  17. 20. The Dust Bowl <ul><li>Name given to the central and southern Great Plains in the 1930s when the region sustained a period of drought and dust storms. </li></ul>
  18. 22. “ Black Blizzard”
  19. 24. Surviving the Great Depression <ul><li>Americans pulled together </li></ul><ul><li>Support for one another & protests led to much needed change </li></ul>
  20. 25. Change in America <ul><li>1933 – 21 st Amendment </li></ul><ul><ul><li>Prohibition is repealed </li></ul></ul><ul><ul><li>Seen as a failed social experiment </li></ul></ul>
  21. 26. Changes in America (cont.) <ul><li>Empire State Building </li></ul><ul><ul><li>102 stories – 1,250 ft. tall </li></ul></ul><ul><ul><li>Employed thousands </li></ul></ul><ul><ul><li>Costs $41 million (half of est. costs) </li></ul></ul><ul><ul><li>Bragging rights for US </li></ul></ul>
  22. 27. End of an Era (1920s) <ul><li>Al Capone </li></ul><ul><ul><li>Arrested </li></ul></ul><ul><li>Calvin Coolidge </li></ul><ul><ul><li>Died </li></ul></ul><ul><li>Charles Lindbergh </li></ul><ul><ul><li>Son kidnapped & </li></ul></ul><ul><ul><li>murdered </li></ul></ul><ul><li>Babe Ruth </li></ul><ul><ul><li>Retired </li></ul></ul>
  23. 28. The Election of 1932 <ul><li>Herbert Hoover (R) </li></ul><ul><ul><li>“Brother Can You Spare a Dime?” </li></ul></ul><ul><li>Franklin Delano Roosevelt (D) </li></ul><ul><ul><li>“ Happy Days Are Here Again!” </li></ul></ul><ul><ul><li>Who would you vote for???? </li></ul></ul>
  24. 29. Hoover vs. FDR
  25. 30. Hoover’s Policies <ul><li>Agricultural policies ultimately failed </li></ul><ul><li>Mid-term elections – Dems gained control of Congress </li></ul><ul><li>Tried to create jobs by spending more on: </li></ul><ul><ul><li>Buildings </li></ul></ul><ul><ul><li>Roads </li></ul></ul><ul><ul><li>Parks </li></ul></ul><ul><ul><li>Dams (incl. Hoover Dam) </li></ul></ul>
  26. 31. Hawley-Smoot Tariff (1930) <ul><li>Highest import tax in history </li></ul><ul><li>Attempt to protect domestic industries from foreign imports </li></ul><ul><li>Backfired b/c Europe raised their tariffs, thus leading to slowdown in international trade </li></ul>
  27. 32. RFC (1932) <ul><li>Reconstruction Financing Corporation </li></ul><ul><li>Gave gov’t credit to many industries, railroads and insurance companies </li></ul><ul><li>Lent money to banks </li></ul><ul><li>Hope = money at top would work its way down and help economy as a whole </li></ul><ul><li>How did people at the bottom view it? </li></ul>
  28. 33. RFC (cont.) <ul><li>People saw the RFC as the gov’t helping banks & big business while ordinary people were starving. </li></ul><ul><li>As a result, Hoover’s popularity took a nose dive </li></ul>
  29. 34. The Roosevelts <ul><li>Franklin Delano Roosevelt (D) & Eleanor Roosevelt </li></ul><ul><li>Distant cousins (yes, I know that’s nasty) </li></ul><ul><li>6 children </li></ul>
  30. 35. Eleanor Roosevelt <ul><li>Niece of Teddy </li></ul><ul><li>“ Ugly Duckling” </li></ul><ul><li>Educated in England & France </li></ul><ul><li>Intelligent, warm – well liked </li></ul><ul><li>very involved in several causes/ reform movements </li></ul>
  31. 36. The Election of 1932 <ul><li>Despite a wealthy upbringing, Roosevelt had extreme compassion for those less fortunate </li></ul><ul><li>Why do you think this appealed to America? </li></ul>
  32. 37. 1932 Election (cont.) <ul><li>Symbol of optimism and hope </li></ul><ul><li>FDR won by landslide </li></ul><ul><li>Served most consecutive terms as president (4) until his death in 1945 </li></ul>
  33. 38. 1933 Inaugural Address <ul><li>“ The only thing we have to fear, is fear itself…” </li></ul>
  34. 39. The First 100 Days <ul><li>Immediate relief = goal </li></ul><ul><li>March 9 - June 16, 1933  a record number of bills sent, all of which passed easily </li></ul><ul><li>Emergency Banking Bill </li></ul><ul><ul><li>March 12 - FDR announced soundest banks would reopen. </li></ul></ul><ul><ul><li>March 13 - deposits at those banks exceeded withdrawals </li></ul></ul>
  35. 40. First 100 Days (cont.) <ul><li>&quot;Capitalism was saved in eight days,&quot; said Raymond Moley </li></ul><ul><li>This was critical b/c it demonstrated to Congress that the New Deal was the real deal </li></ul>
  36. 41. First 100 Days (cont.) <ul><li>Other bills included the creation of the: </li></ul><ul><ul><li>Federal Emergency Relief Administration </li></ul></ul><ul><ul><li>Civilian Conservation Corps </li></ul></ul><ul><ul><li>Reconstruction Finance Corporation </li></ul></ul><ul><ul><li>Tennessee Valley Authority </li></ul></ul>
  37. 42. First 100 Days (cont.) <ul><li>Congress also: </li></ul><ul><ul><li>gave the Federal Trade Commission broad new regulatory powers </li></ul></ul><ul><ul><li>provided mortgage relief to millions of farmers and homeowners. </li></ul></ul>