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Ing. Tomáš Dudáš, PhD. 1933 – situation report Every bank in the nation had closed its doors and no one could cash a check or get at their savings The unemployment rate was 25% and higher in major industrial and mining centers Farm prices had fallen by 50% Thousands of mortgages closed down The New Deal Franklin Delano Roosevelt - 1933 Two main goals – help the troubled economy and introduce major reforms into capitalism 3 Rs giving Relief to the unemployed and badly hurt farmers Reform of business and financial practices promoting Recovery of the economy during the Great Depression "First New Deal“ – 1933/34 Banking acts On March 6, 1933, two days after becoming president, Roosevelt declared a five-day national bank holiday to close banks temporarily. On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's Administration; the act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in hoarded currency and gold flowed back into them within a month, thus stabilizing the banking system Congress created the Federal Deposit Insurance Corporation (FDIC), which insured deposits for up to $5,000 The government suspended the gold standard for United States currency "First New Deal“ – 1933/34 Economy Act Improving the budget balance NIRA – National Industrial Recovery Act "Code of Fair Competition„ NLRA - National Labor Relations Act Farm and rural programs The Federal Emergency Relief Administration (FERA) – 500 million USD The Civil Works Administration (CWA) The Public Works Administration (PWA) The Agricultural Adjustment Act: stabilized prices on farm produce through paying farmers to reduce their acreage under cultivation Repeal of Prohibition The Civil Works Administration (CWA) • Built 800,000 km of roads. • Built 40,000 schools • Built 500 airports & rebuilt 500 more • Built 150,000 public toilets • Paid people to sweep up leaves in the parks. • Paid unemployed actors to give free shows. • Hired 100 people to scare pigeons away with balloons from public buildings in Washington DC. The Public Works Administration (PWA) • Built 70% of USA Schools. • Built 35% of USA Hospitals. • Built for river dams. • Electrified the New York Washington railway. • Built 50 military airports. • Built two aircraft carriers. • Built four cruisers & destroyers for the US Navy. Social security - 1935 Anglo-American society – minimal security net Local level and not very generous The Social Security Act provided: An income for the aged A scheme for unemployment compensation Relief aids to the aged, blind and dependent children USA was the last major industrial nation to adopt some form of comprehensive social insurance New Deal - conclusion Federal government directly provided services to the American people -- “welfare state” Vast centralization of national power Increase in power of the presidency Creation of a mixed economy – market economy with government interventions Did the new deal stop the depression? “Prosperity” of Wartime The American GDP doubled between 1941 and 1945 World War II produced demand for American products as early as 1940 It became clear that the US must supply war goods for Great Britain Lend-Lease Act – 1941 By august 1945 the US was supplying war materials in value around 50 billion USD to its partners under this act Lend-Lease deliveries were greater than the sum of all federal expenditures between 1933 to 1939 Financing the War Increased taxes Debt financing Rising government deficits (-29,1 billion USD in 1945) Rising public debt (271 billion in 1945) The US government was selling bonds to the public (157 billion USD) and to the Federal Reserve Increase of the money-supply Change to command economy New “war powers” to the president 1940 – National Defense Advisory Commission 1940 – National Defense Research Council 1942 – War Production Board and Office of Price Administration 1943 – Office of War Mobilization Huge power of FDR In 1942 he sent 115 000 persons with Japanese ancestry into internment camps by an executive order Labor and materials The armed forces had 12 million soldiers by 1945 250 billion USD has been spent on these soldiers between 1941 and 1945 The civilian nonagriculture labor force expanded by 30 % Unemployment vanished (1,2 % in 1944) New people in the labor force – women, teenagers, disabled, aged people