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TIME-LINE of The Great Depression 1929-1939 1920’s WARNING SIGNS that almost everyone ignored. During WW-1 Federal spending grows 3 times larger than tax’s collected 600 banks fail every year, farmland value drops 40% from 1920-1929 Technological Unemployment: 2,000,000 workers (Including farmers.) are replaced by automatic and semi-automatic machinery, 1,200 business mergers and 6,000 independent companies are bought up. By 1929 200 companies control more than half of all USA biz. 1929 17% of the richest people owned 40% of the USA $$$. The middle class is reduced to 20% 1923: President Warring Harding dies in office thus ending one of the most corrupt Administrations in US history, there would be three republican Presidents in a row. Most people would blame the Republicans for the Great Depression in 1929. A Republican will not be President again until 1953. 1924: The stock market begins an incredible rise. More people spend more money on stocks and bonds than any time in the USA history. 1925: Republican President Calvin Coolidge lowers top tax rate to 25%. 1928: Construction building boom is over, more difficult to borrow money at higher interest rate. Farm income drops from 15% to 9% May to September 1929: price of stock rises 40% trading of stock will double from 2.5 million to 5 million shares a day. 1929: Herbert Hoover becomes 31st US president in November. Half of all Americans are living below the poverty level. Companies manufacture 3 times as much as is sold consumption-buying & selling by individuals in the US business begins to drop sharply. Automobiles sales fall 33% in 9 months before the crash. Construction falls $ 2 billion since 1929 serious financial recession begins in August, production falls to 20% and prices went down to $7.52. October 24, 1929 “Black Tuesday” market closes 80% of value plummets down in 16 hours. Time line: effects of the crash of 1929 1930: GNP falls to 9.4% unemployment up to 300% to 8.7%. 1931: No major legislation is passed by Herbert Hoover to stop the Great Depression, Bank panic occurs: millions of people attempt to withdraw $ from banks….but find that their bank has closed, their $$ is gone forever. GNP falls again 9.4% unemployment rate up to 100% to 15.9%. 1932: GNP falls a record 13.4% unemployment up to 23.6% to 35% 10,000 banks have now failed $2 trillion in deposits are lost, 1,300,000 Americans have lost their jobs affecting 3,500,000 more, farm prices fall 53% since 1929. Toledo, Ohio were Mr. Simon went to High School has 80% of it’s work force unemployed Hatred for President Hoover grows. 1932 Nov. Franklin D. Roosevelt wins Election as 33rd US President. The Great Depression of 1929 A Financial PANIC CAUSES 1. American industry over-expands its production facilities. 2. Consumers lacked enough incomes to continue buying the total output of industry because workers wages did not rise. 3. Farmers had low incomes after WW-1 because of depressed prices less than $300.00 per year. 4. Bankers made bad loans were and not paid back and so ho to close. These bank failures wiped out the savings of millions of investors. 5. “Get-Rich-Quick” speculators bid up the price & value of stocks & real estate to unrealistic levels. Money was loaned by stock brokers to buy stocks. 6. World-Wide trade declined sharply because WW-1 had hurt Europe’s economy severely and greatly lessoned Europe’s Ability to buy us products & pay back $$ owned to USA. 7. High tariff taxes on trade hurt the flow of goods between nations. 8. The MOST IMPORTANT and IMMEDIATE cause was the catastrophic stock market CRASH that starts in October 29, 1929. Differences from other Depressions. The Great Depression was the most severe in history because of the following 1. The USA no longer had an unsettled frontier with its unlimited economic opportunities as an escape valve from “bad times.” 2. The USA had become primarily industrial & thus more Americans were profoundly Affected by business and banking failures. 3. Although the depression of 1929 started in the USA, it quickly spread through out the World. (Lasted for 10 years.) Depth of the Great Depression economic figures By 1932 production & prices were greatly reduced stocks lost 90% of their value. Business Failure= 32,000, Bank closures = 5000. 12,000,000 workers 25-35% had no jobs. What did Roosevelt do when he got elected? 1. Inauguration Speech: He told America "We have nothing to fear but fear itself!" He wanted to inspire optimism and hope. He did not want America paralyzed by fear. He was a man of action. 2. First Hundred Days - For the first hundred days of his administration Roosevelt and his Brain Trust where a whirlwind of activity. Legislation was introduced and passed at a furious pace as Congress mostly acted as a rubber stamp. Roosevelt called Congress into session and asked for executive power to wage war against poverty and pessimism. He said he wanted a power "as great as the power that would be given me if we were in fact invaded by a foreign foe." At first he ordered a bank holiday, which closed every bank in the nation and stopped people from withdrawing all of their money. This ended the panic. He then signed legislation called the Emergency Banking Act. This closed all of the insolvent lending institution and only reopened the solvent ones. While many lost money at least the panic was eased. What was Roosevelt's underlying philosophy? 1. Keynesian or "pump priming" economics. Based on the beliefs of economist John Maynard Keynes it held that money should be invested in the people, the working class. Then spending would increase with new money in circulation. As spending increased it was expected that businesses would expand to meet the new demand and hire new workers. This would spur on more spending and more growth. This plan was the opposite of the Republican plan ascribed to by Hoover and earlier leaders. They had believed in supply side or "trickle down" economics. In this philosophy money was to be invested at top, in business. Then businesses would expand, hire new workers and this in turn would spur on spending and further economic growth. What did Roosevelt mean by relief, recovery and reform? 1. Relief - Immediate action taken to halt the economies deterioration. 2. Recovery - "Pump - Priming" Temporary programs to restart the flow of consumer demand. 3. Reform - Permanent programs to avoid another depression and insure citizens against economic disasters. Relief Recovery Reform Immediate action taken to "Pump - Priming" Temporary Permanent programs to avoid halt the economies programs to restart the flow of another depression insure citizens deterioration. consumer demand. against economic disasters. Bank Holiday Declared so that the panic would be stopped. Agricultural Adjustment Act Securities & Exchange (AAA) Commission (SEC) Taxed food processors, gave the Permanent Agency set up to money directly to farmers as a monitor stock market activity and payment for not growing food. This ensure that no fraud or insider decreased supply so price would go trading was taking place. up. Emergency Banking Act National Industrial Recovery Act Federal Deposit Insurance Closed the insolvent banks (NIRA) Corporation (FDIC) and only reopened the solvent Created the (National Recovery Permanent Agency designed to ones. Administration) a consortium of insure depositors money in businesses organized by the savings banks. Originally insured government given the power to set up to $5,000 per depositor today rules/regulations for the economy. it has increased to $100,000. Members of the NRA displayed a blue eagle. Federal Emergency Relief Home Owners Loan Corp. Social Security Administration Gave loans to home owners so they Permanent agency designed to Act (FERA) Gave immediate help to those could pay their mortgages. This ensure the older segment of that needed it in the form of prevented people from going society would have enough cash payments. homeless and prevented banks from money to survive. The key is that going under. they would then abe able to spend throughout their lives. Civil Works Administration Works Progress Administration National Labor Relations Act (CWA) (WPA) and National Labor Relations Provided temporary jobs Provided long term government jobs Board (NLRA/NLRB) repairing roads and bridges. building schools and other public Known as the Wagner Act it works projects. helped unions and workers. By creating the (National Labor Relations Board) which enforced labor law, made sure that fair business practices where upheld. Civilian Conservation Tennessee Valley Authority Soil Conservation Act Laws mandating proper soil Corps (CCC) (TVA) Temporary jobs to unmarried Agency created to build dams in the maintenance to make sure that single adults filling sand bags Tennessee river valley. These dams another dust bowl was avoided. and helping out at disaster provided more stable irrigation and type situations. Participants cheap hydroelectric power. lived in barracks type housing. EARLY NEW DEAL MEASURES FAIR LABOR STANDARDS ACT: provided minimum wage for workers. CIVILIAN CONSERVATION CORPS: provided work for jobless males between 18 & 25 in reforestation, road construction, and prevention of forest erosion. Ended in 1941. AGRICULTURAL ADJUSTMENT ACT: established principle of government price support for farmers and guaranteed farm purchasing power. TENNESSEE VALLEY AUTHORITY ACT: federal construction and ownership of power plants regional development of Tennessee Valley (7 State Area) FEDERAL SECURITIES ACT: required full disclosure of information related to new stock issues. NATIONAL EMPLOYMENT SYSTEM ACT: created US employment service. HOME OWNERS REFINANCING ACT: use of government bonds to guarantee mortgages. BANKING ACT OF 1933: created the FDIC, guaranteeing the safety of bank deposits. NATIONAL INDUSTRIAL RECOVERY ACT: minimum wages & self-regulation of industry-1935 PUBLIC WORKS ADMINISTRATION: appropriated funds to construct roads and federal projects. SECURITY AND EXCHANGE ACT: federal regulation of the operation of stock exchange. NATIONAL HOUSING ACT: federal housing administration insured loans of private banks and trust companies for construction of homes. COMMUNICATIONS ACT: federal housing administration insured loans of private banks and trust companies for construction of homes. HOME OWNERS LOAN ACT: government financing of home mortgages. NATIONAL HOUSING ACT -- construction of low cost public housing and slum clearance. SOIL CONSERVATION ACT: established federal soil conservation services. RESETTLEMENT ADMINISTRATION: built model communities for low income city workers RURAL ELECTRIFICATION ADMINISTRATION: program brought electricity to rural areas. NATIONAL YOUTH ADMINISTRATION: federal work relief and employment for young people. NATIONAL LABOR RELATIONS ACT: collective bargaining, unions supervised by the NLRB. SOCIAL SECURITY ACT: created Social Security System, old age and survivors insurance; aid to dependent children etc.