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Unit 3 Lesson 2
the Period
Between the Wars
Double Catastrophes of the 1930s
(the party is over)
Great Depression
11.6 Students Analyze the different explanations
for the Great Depression and how the New Deal
fundamentally changed the role fo the federal
government.
Table of Contents
1. Causes of GD
a. Failure of Dawes
Plan
b. uneven distribution
of wealth
c. credit problem
d. the stock market
crash
i.
speculation
2. Fall Out
a. A perfect storm
b. Tariffs
3. Keynesian Economics
4. Effects of GD
5. The Dust Bowl
6. Hoover
a. failed response
b. Hoovervilles
c. RFC
d. trickle down
economics
e. Bonus Army
What you will learn:
 Uneven wealth
 farmers and unskilled workers lost money
 Overproduction caused lost jobs
 The Federal Reserve increases rates
 Tried to slow stocks but failed
 During the summer of 1929 production
decreased
 Black Thursday – stocks crash in 1929
I. Global Depression
Dawes Plan Failed
Overall US production
plummets
Allies cannot pay
debts to United
States
U.S. investors have
little or no money to
invest
Europeans cannot
afford American
goods
U.S. investments in
Germany decline
German war
payments fall off
II. Unevenly distributed
Wealth
 Rich became richer
 Worker annual income:
 $2000 a YEAR
RICH: $100,000
 1% of the population controlled most of the
wealth in America
 The wealthy did not buy enough to keep the
economy booming
 Overproduction and
underconsumption
The Down Turn Begins

Stock market gambling included



Americans borrowed heavily to bet on
stocks
businesses put their cash into margins
loans rather than into new machines and
factories
the connection between the real value of
companies and their stock prices was
reduced
Credit Problem
 People used credit
 Installment plans
 By end of 20s 80% of radios and 60% of
cars bought on credit
 Problem: America was living beyond its
means
The Economy is in
Trouble
 Signs that the economy might be
weakening or be in trouble in the 1920s
 rural bank failures
 wealth was unevenly distributed
 United States imports declined by the end of
the decade
Stock Market Crash
 Confidence in Market important
 Speculation
 Investors gambled with money they did not have,
stocks increased and a profit was made
 Stock Market began to fall
 Fall became a free fall by end of Oct. 1929
 Confidence in market over
More Troubles Brewing

Stock prices grossly inflated

Buying on margin



Too much borrowing from banks
Do not have real value
Buying stocks on margin contributed to
the Great Crash

as prices fell, stockholders either had to
sell their stocks or pay more cash
Stock Market Crashes

The Stock Market “crash” refers to


the huge drop in the value of stocks
Basic Cause of the Depression

overproduction of consumer goods
October 29, 1929
 GE stock went from $400 to $283
 People pulled money out of the stock
market
 Billions of dollars were lost
 Economy contracted
 What caused the Stock Market to crash?
Could have it been prevented?
Fall out





Banks Collapse
People took their money out of the bank
1929 641 banks failed
1930 1350
Why were there so many bank failures?
Effects of the Great
Crash
 Investors and business lose millions
 Thousands of banks fail
 Savings are wiped out
 Business production cut
 Lay off thousands of workers
 Unemployment rises
 Consumer spending further drops
 The Great Depression sets in
A Perfect Storm
 Federal Reserve cut interest rates in the 1920s
to stimulate growth (sound familiar?)
 By 1929 the FR limited money in circulation to
stop lending
 So then there was not enough money in
circulation after the Crash
 Result: investors went to banks that did not
have enough cold hard cash to take out their
money
Spiraling out of control
 Not enough money + Not enough buyers
+Not confidence = business fails
 Businesses respond by:
 Cutting pay roll, lay offs, cutting production,
 Closing doors
 1933 25% of Americans were out of jobs

Presidential Lack of
Action
President Hoover opposed direct government
relief for individuals

the character of the American people would be
damaged
Hoover’s way of dealing with the depression





tax cuts
higher tariffs
a limited program of public works
In the 1930s duties were boosted on a thousand
items by the

Hawley-Smoot Tariff Act
Hoover Tries

Reconstruction Finance Corporation helped




large corporations
banks
insurance companies
Did not help


Farmers
People in need

Poor homeless people built shantytowns called
Hoovervilles (Play song)
Tariffs
 June 1930 Congress passed Hawley-Smoot
Tariff
 Raised prices on foreign imports
 foreign goods could not compete in U.S.
 Europe passed their own tariffs
 Tariff added to problems
 We had too much stuff and now could not sell it
to Europe!!!
 H-S Tariff destroyed international trade
Keynesian Economics
 John Maynard Keynes
 What caused Great Depression:
 Gov’t did not have proactive polices
1932

The Bonus Army


a march on Washington was made by a group of
unemployed WWI veterans
Presidential election

Republican platform


letting the nation’s problems be solved by natural forces
Democratic platform

the repeal of Prohibition and fairer distribution of the
products of industry
Keynes Analysis of the
Causes of the GD
1.
2.
3.
4.
Short money supply
Uneven distribution of wealth
Stock speculation
Consumer spending, productivity and
employment
IV. Effects of the
Depression
 millions of unemployed
people
 malnutrition in children
 fewer marriages
More Effects
 Women and African Americans
 often lost their jobs to white men
 Heavily discriminated
 Scottsboro Case
 the justice system ignored the civil rights
of African Americans
Yet Even More Effects
 Farmers economic problems
 falling demand and rising supply of crops
 The poverty of the depression exists amid
the plenty of the rich country
FDR Wins 1932 election



People did not like Hoover
Wanted to do whatever possible to try
to end the Depression
Had a political history of establishing a
relief program
The Dust Bowl
11.6.3 Discuss the human toll of the Depression, natural
disasters, and unwise agricultural practices and their
effects on the depopulation of rural regions and on political
movements of the left and right, with particular attention to
the Dust Bowl refugees and their social and economic
impacts in California.
V. Dust Bowl
 Causes
 dry-farming techniques
 drought
 wind
 Migrants headed to
California
Agriculture







One fourth of American work force
WWI – increase crop demands
Did not adjust for post war consumption
Crop prices fell
Ogallala aquifer – put a straw in it
Dust Bowl – top layer of soil gone
Lots of dust
Farming Techniques

Heavy farming



Ruined the top soil
Removed natural grassed that kept soil
down
Disaster


Heavy winds
Loose soil
Dust Bowl




1932- Great Plains
Began in Tx, Ok, Ks, NM and Co
Storms killed cattle and birds
Seeped into houses and covered
everything
 1930 – 1934 – one million farmers lost
their farms
 Banks sold farms at auction
 Some became tenant farmers on their
own land
Migration
 Ecological and Economic Disaster
caused people to move
 Dust Bowl refugees: Okies
 Moved west to CA, OR and WA
 800,000 moved out of Ar, Ok, Tx
 Millions left the midwest
 Rural states depopulated
 Large cities gained people
Affect on families
 “breadwinners”
 Shame as a man
 Desertion of families
 Guilt
 Felt bad if doing better than suffering friends and
fam.




Reduced birthrates, lowest in U.S. history
Making something out of nothing
Kids quit school
Broken families
Hoover and Volunteerism
 Hoover product of his times: laissez faire
 Hoover’s policy: do nothing
 Hoover asked businesses to:
 Keep wages, prices up and unemployment
down
 Governments: reduce taxes, interest rates
and create public works
 Richer people to donate to charities
 Encourage consumption and production
Hoover Fails
 Good ideas, but relied on volunteer
cooperation
 “pull yourself up by your bootstraps”
 Faith in localism: local and state
governments could resolve the problems
 They did not have the resources
Hoovervilles
 Failure linked to
president’s name
 Campfire = hoover
heaters
 Homeless camps =
hoovervilles
Hoover Policies
 Reconstruction Finance Corporation
(RFC) – Hoover tried to get Congress to
create the RFC.
 RFC gave billions the railroads and large
business (sound familiar?)
 Money given to banks so they could lend
money
 Hoover believed that banks could:
 Give money to businessmen, businessmen
would hire workers, production goes up and
consumption rises
 Known as trickle down economics.
 Banks got money, but did not lend it or
increase loans
 Businesses did not hire more workers
 Money did not “trickle down”
Bonus Army
 1932 WWI vets went to D.C. to demand
the bonus Congress promised
 Called the Bonus Army
 1931 Congress passed the bill, Hoover
vetoed it
 20,000 vets occupied the capital
 A riot broke out when police tried to evict