THE GREAT DEPRESSION:
CAUSES FOR THE STOCK MARKET CRASH:
- Americans purchased stocks on margin
- Over speculation on property
- Supply Side Theory: supply and demand would eventually lead to overproduction of manufactured goods
- Usage of credit: the farmers that can conveniently buying expensive agricultural equipment on credit or installment plan can afford to pay the money back
EFFECTS OF CRASH:
- By January 1930: unemployment of 4 million people
- The damages of the crash was intense to the Americans because there was no reliefs like: social security, welfare or safety net
- Banks couldn’t lend money
- Excess agricultural goods preceded to reduced prices
- International retaliatory tariffs (largely a response to the Hawley-Smoot tariff)
The slump of this depression steeped even lower through Hoover’s reaction to the Depression of this period
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HOOVER'S RESPONSE:
- Initially believed that Europe was at fault
- Passed the Hawley-Smoot tariff which increased the tax on imported goods to nearly 50%
- It troubled international trade
- Fortified public works
- Deferred bank activity
- Reluctant to give direct aid to citizens, he believed it the job of private charities
- Believed that the issue would naturally fix itself
- Congress created the RFC (Reconstruction Finance Cooperation) in 1932
- Gave loans that benefited banks, railroads, insurance companies.
BONUS ARMY:
- Here is the situation where the Veterans of World War I marched with their families to the Capitol, demanding that Congress pay them the money the government promised to pay them when they were fighting in war
- They camped in Hoovervilles
- Hoover’s response: called in the army. The army used both force and tear gas to remove the persistent veterans
DUST BOWL:
By 1931:
Farmers' Holiday Association 1932
- There was no rain in the Great Plains
- Temperatures had risen in Iowa which had greatly destroyed the crops.
- Dust Storms in Kansas, Colorado, Oklahoma, Texas and New Mexico
- RESULT: Many farmers and families migrated to the central valley of California and lived in migrant camps
Farmers' Holiday Association 1932
- Midwestern farmers withheld crops from the market
- Used road blockade to demonstrate their point
THE NEW DEAL:
Franklin Delano Roosevelt formed an economic stimulus program titled the New Deal:
The focus of this was to try and bring back the prosperity and improve the standard living of the Nation through the three R’s (relief, recovery, reform)
The focus of this was to try and bring back the prosperity and improve the standard living of the Nation through the three R’s (relief, recovery, reform)
- Relief for the people out of work
- Recovery for the business economy
- Reform for the American economic institutions.
- Roosevelt counted on on his Brain Trust (a team of university professors) to assist him in making the New Deal
THE FIRST HUNDRED DAYS SINCE FRANKLIN’S PRESIDENCY
FDR endorsed several laws and agencies which follow:
- Bank Holiday on March 6, 1933: FDR stated a bank holiday and all banks were closed so that the government could reorganize them.
- Beer Wine Revenue Act/Repeal of Prohibition
- RESULT: led to more taxes that would help cash flow
- Fireside Chats: Radio programs which was a segment which allowed FDR to keep Americans hopeful and informed about the future and his plans to get out of the depression
New Deal “Alphabet” Agencies:
- Federal Deposit Insurance Corp. (FDIC): assured the Americans that their individual bank deposits up to $5,000was safe and reassured those who put their money in banks that they will get at least some of their money back
- Home Loaners Corp. (HOLC): presented refinancing of small homes to thwart foreclosures
- Farm Credit Admin.: granted low-interest farm loans and mortgages to avert foreclosures on the property of indebted farmers
- Federal Emergency Relief Admin. (FERA): provided grants of federal money to states and local govt. that worked relief programs for the jobless and homeless
- Public Works Administration (PWA): provided money to state and local governments for building roads bridges, dams, and other public works.
- Civilian Conservation Corps (CCC): endowed jobs to young men and paid their families
- Tennessee Valley Authority (TVA): hired people to build dams, operate electric power plants, control flooding and erosion, manufacturing fertilizer, sold electricity
- Agricultural Adjustment Admin. (AAA): stimulated the reduction of famers’ production to aid in increasing prices with subsidies (later declared unconstitutional)
- Security and Exchange Commission (SEC): structured the stock market and positioned boundaries on speculative exercises they were part of the cause of the stock market crash in 1929
- Federal Housing Admin. (FHA): protected bank loans for building new houses and mending old ones for the construction industry and homeowners
- Works Progress Admin. (WPA): one of the biggest relief programs, provided jobs
The Second New Deal:
- National Labor Relations Act or the Wagner Act 1935: labor law that assured a worker's right to unionize and the union's right to bargain-outlawed unfair labor
- Federal taxes: revenue act of 1935 increased taxes on the incomes of wealthy
- Social Security Act: formed a federal insurance program built on the assembly of taxes from employees and employers throughout people's careers the money would then be put into a trust fund that would make monthly payments to retired persons over 65 yrs. old. Unemployed , disabled also received benefits
- Fair Labor Standards Act- minimum wage, a maximum workweek and child-labor restrictions were declared
Weakened New Deal
- Recession from 1937-1938:
- Social Security tax took away from consumer spending
- govt. reduced spending on relief
- Keynesian economics told FDR that he was wrong in attempting to balance the budget, Deficit spending was needed to initiate economic growth
Did the New Deal Work? How this was a cause which furthered prosperity or depression?
RESULT OF THE WORK FROM THE NEW DEAL:
- The programs demanded by the first and second New Deal abetted to generate a significant amount of jobs and to revive the economy.
- Disputably, the New Deal did not much to appease the economic turmoil of the Great Depression.
- Conversely, with the great growths in yield related with the Second World War the American nation was able to make a complete turnaround to officially restart their economy.
- The New Deal did ensue in the formation of numerous workings and programs that directly helped the American people
- The New Deal improved transportation, leisure and its accessibility, safety, and ownership opportunities
- Also the New Deal greatly improved moral
- When Americans grown enough money to spend, they reclaimed their independence and their pride.
- FDR’s launch and institution of the New Deal policies was not a time of false prosperity as in the ‘Roaring 20’s’ and the decade after WWI, but a period of re-growth and re-establishment.
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