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BIG PICTURE ■ The roaring twenties came to a screeching halt on October 29, 1929 when the stock market crashed. Such factors as overproduction, under consumption, unequal distribution of wealth, depressed farms, and stock market speculation plunged the United States into the Great Depression. Widespread unemployment followed and had a variety of social and political impacts on our nation. When Franklin Roosevelt became President in 1932, he began initiating a series of reforms known as the New Deal. These reforms attempted to resolve issues that had led to the Depression, as well as provide new jobs for unemployed Americans. Many of the institutions established by the New Deal still exist today. ■FOCUS Questions: –What factors led to the Great Depression? –The text argues it wasn’t caused by the stock market crash. What were the causes. – How did the federal government respond? The Great Depression The Great Crash ■Prelude to the stock market crash –In 1927, the economy had a recession but gov’t & business leaders ignored warning signs –The Federal Reserve lowered interest rates for loans to stimulate the economy, but this easy credit led speculators to buy stock “on-the-margin” The Great Crash ■An initial stock market crash on Oct 24, 1929 (Black Thursday) led to a catastrophic drop in stocks on Oct 29 (Black Tuesday) –Panicked investors sold stocks, causing stock prices to plummet –Banks lent less money, factories produced less, workers were fired or paid less → consumers had less money to spend → factories & businesses closed The Great Crash ■Stock market only had about 3 million active buyers & sellers ■But, the spillover into the greater economy led to the Great Depression The U.S. stock market had only about 3 million active buyers & sellers but the spillover into the greater economy led to the Great Depression Unemployment, 1929-1942 This downward spiral continued for 4 years; By 1932 unemployment was at 25% The Great Crash ■Reasons for the depression: –1) Overproduction of consumer durable goods & agriculture –2) The post-war conditions in Europe decreased foreign trade Consumers already owned durable & were not buying more –3)goods Unequal distribution of wealth, high consumer debt, stock market over speculation led to an overall decrease in consumer purchase power In 1929, the total market debt of By U.S. the1934, USA was 210% of the debt rose to value of 265% of GDP GDP In 2005, the value of U.S. debt was 303% of GDP Effects of the Great Depression ■The Depression hit all classes: –Many families lost their homes or farms & were forced to live in “Hoovervilles” –The U.S. saw unprecedented poverty & suicide rates; fathers abandoned their families; lawlessness ensued –The U.S. gov’t offered relief checks to the unemployed Effects of the Great Depression ■African-Americans who had migrated to North were laid off ■Mexican immigrants faced competition & deportation from angry Americans ■The middle class was hit hard: –Refused relief checks & charity –Many lost their homes –Health care declined; doctor & dentist visits were “luxuries” Employment Agencies & Relief-Check Lines Soup Kitchens & Breadlines Mortgage Foreclosures These 4 potatoes are Christmas Dinner Where’s daddy? “Hoovervilles” & “Hoover Flags” ■FOCUS Question: –How did the federal government respond to the Depression? Hoover Struggles to Fight the Depression (We will watch in class before this part of the discussion) Hoover video (8 min) Hoover and Voluntarism ■President Hoover’s initial response individualism” was to “Rugged reassure Americans that prosperity would return ■Hoover rejected bold gov’t action & called for volunteerism among charities, local gov’t, & business ■As the depression worsened, Hoover called for gov’t projects like the Reconstruction Finance Corps (RFC) which loaned money to failing businesses The Hoover administration initiated job-creation programs, like building the Hoover Dam Hoover and Voluntarism ■In 1932, Hoover’s presidency suffered two final blows: –When 22,000 war veterans marched to the capital to demand their WW1 bonus checks early, Hoover ordered this Bonus Army to be forcibly removed –The steady rise of bank failures led to a complete collapse of the U.S. banking system Bonus Army Douglas MacArthur Dwight Eisenhower Bank Failures, 1929-1933 The Dust Bowl (1931-1939) worsened the “Okies” & “Arkies” Areas Affected by the Dust Bowl drought effects of the Depression Fighting the Depression ■The inability of Republicans to resolve the economic depression opened the door for a Democratic takeover in politics ■Once in power, Democrats succeeded in relieving some suffering, restored hope, & created an unprecedented level of gov’t intervention in the process Conclusions ■The Depression of the 1930s came as a shock to Americans: –The consumer revolution led to confidence that 1920s economic prosperity would continue –When the stock market crashed in 1929, businesses closed & millions were unemployed –Americans began to look to the gov’t for unprecedented support