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The Great Depression and the New Deal



1. What does “buying on margin” mean?
2. What was the “Bonus Army”?
3. Name one of the “Hundred Days”
   legislation acts that passed.
4. What was one of the three goals FDR
   had in the “Second Hundred Days”?
5. Name one of the Second New Deal
   legislation acts that passed.

 Bonus question: What happened 67
  years ago yesterday?
The Great Depression and the
       New Deal, 1929-1940
                   Chapter 24
Hard Times

• The economic depression that occurred
  in the 1930s was more than financial
  • The psychological impact was called the
    “invisible scar”
  • Those who were alive during the
    depression still retain some of their frugal
  • Many people blamed the stock market
    crash of 1929 as the cause for the
    depression—this is inaccurate!
Hard Times

• The stock market became fashionable in
  the 1920s
  • It was patriotic to buy stocks, even if you
    didn’t have the money for it
  • John J. Raskob (GM chairman) wrote an
    article for Ladies Home Journal titled
    “Everyone Ought to Be Rich”
    • The article said that by investing $15/mo, you
      would have $80K in 20 years
  • People began buying stock on speculation
    • Take out loans to buy stocks assuming that their
      value would increase enough to pay back the loan
      plus make a profit
Bull Market
Hard Times

• Buying on the
  margins (loans)
  allowed more people
  to “afford” stocks
• Corporations with
  spending money
  would lend money to
  stockbrokers rather
  than re-invest in their
  own companies for
  new technologies,
  • Why is this a problem?
Hard Times

• Many assume that the stock market crash
  occurred over a few days
  • Not true—the “crash” had been at least a month
    in the making
  • Dow reached its peak on Sept. 3 (381.17)
  • The market started sliding in September, slowly
  • On Oct. 23, 1929 the Dow Jones fell 21 points
    (large sum for back then)
  • On Oct. 28th the Dow lost 28 points
  • On Oct. 29 (Black Tuesday) the Dow fell another
    30+ points
  • It doesn’t hit bottom until July 1932, falling 89%
    from the Sept. 3, 1929 record
Compare to 2008

• Stocks height of 2008 was at
  13,043.96 (Jan. 2, 2008)
• Beginning of the drastic decline—Oct. 1
• Low point=7,552.29 (Nov. 20)
• Ending point for Dec. 5,
• This has been the worst year for the
  stock market since the 1930s
Hard Times

• As the stock market became shaky, so did the
  credit market
  • Because the loans were backed by the stock
    itself, as the value decreased, the borrower had
    to pay the difference
  • Half the value of stocks was lost in a matter of 10
• In late Oct. Hoover stated that the country
  was on a “sound and prosperous basis”
  • "In the long run, we can be confident that our
    economy will continue to grow, but in the short
    run, it is clear that growth has slowed.“
                   —President Bush, March 17, 2008
Hard Times

• Andrew Mellon, Sec. of the Treasury
  under Hoover, said that the stock
  decline would lead to a purge of the
  rottenness in the system
• No one was predicting a depression at
  this point
• Despite the bleak market numbers,
  this was not the cause for the
Hard Times

• Overproduction was the key cause of the
  • As more agricultural and industrial companies
    had been urged to make more, consumers
    were buying less
    • Wages rose 8% between 23 and 29 while worker
      output rose 32%
• An unequal distribution of wealth also
  contributed to the oncoming depression
  • 80% of the nations families didn’t have any
Hard Times

• The crash caused investors, businesses, and
  the wealthy to lose confidence
  • Manufactures decreased production and laid off
  • With higher unemployment, fewer people could
    buy goods and thus companies lost more money,
    which meant more layoffs
• Banks began to fail as people began
  withdrawing the money (banks were not
  insured at the time)
  • 5000 bank failures occurred between 1929-1932
  • What happens to the money when a bank fails?
Hard Times

• There is no such thing as “unemployment
  benefits” during this time
• By 1933 16M people were without jobs
  (33% unemployment rate)
  • Today’s unemployment rate (after 500K
    people being laid off in Nov. 2008) is around
• The psychological toll of unemployment
  was harshened by the philosophy that
  each was responsible for his own success
Hard Times

• Men, especially 35-55, found it more
  difficult to cope with
  • They felt despised, and lazy
  • Many contemplated, or did commit suicide
  • Others became drunks
• Women could get jobs easier because
  they were paid less
  • This disturbed the traditional “male-
    breadwinner” belief
  • Those who did work had to put up with being
    harassed because of fear of losing their job
Hard Times

• Local efforts to help were not
  • Money, resources, and staff could not deal
    with the 50% unemployment rate in some
  • Warmer areas like FL and CA could not
    deal with the jobless migrants seeking
  • By 1931 Los Angeles was seeing new
    arrivals at a rate of 1200 per day
Hard Times

• Hoover seemed to ignore the severity
  of the issue by claiming that the local
  communities could handle it
  • The President’s Organization for
    Unemployment Relief (POUR) was led by
    Walter S. Gifford who urged fundraising at
    the local level and said it would be a
    disservice to the unemployed to give
    Federal aid
    • FDR’s administration created federal aid in the
      form of welfare, etc? Has it been a disservice?
Hard Times

• Hoover believed that business
  confidence was the key
  • He created the Reconstruction Finance
    Corporation (RFC)
    • Government credit would be available for
      bank, RRs, insurance, and other businesses
    • This belief was based on idea that credit was
      not being offered because the companies could
      not afford, not because the consumers couldn’t
    • Hoover didn’t want this money going to states
      and individuals, but Congress changed that
Hard Times

• In 1932 Congress passed the
  Emergency Relief Act allowing $300M
  to go to states who needed additional
  • Only $30M had been given out by Dec.
  • Only a small portion went towards public

1. What were some of the negative
   outcomes of the Dust Bowl?
2. Name two of the states effected by the
   Dust Bowl?
3. What did the Bureau of Indian Affairs do
   under FDR?
4. Name one of the movies that came out
   in the 1930s
5. Explain FDR’s court packing bill
Bonus: Name two of the acts that Britain
   passed that led to the American
Hard Times

• By 1932, protests were occurring across the
  • Farmers created the Farmers’ Holiday
    Association—refused to sell goods until prices
  • Thousands marched on Ford River Rouge Factory
    in Detroit—police killed 4
  • The “Bonus Army” marched on D.C. to demand
    that the WWI bonus of $1k be paid in cash now
    instead of in the form of a matured bond in 1945
     • The Senate refused to pass a bill
     • The remaining soldiers were removed by MacArthur’s
       men providing a sad image for the heroes of 1918
Hard Times

• It is easy to see why Hoover didn’t get
  • FDR’s acceptance speech for the
    Democratic candidacy was “I pledge you, I
    pledge myself to a new deal for the
    American people.”
  • During the campaign, FDR called for
    addressing underconsumption and
    redistributing wealth
FDR and the First New Deal

• FDR was born wealthy and joined politics
  • It wasn’t until he was stricken with polio that
    he became such a determined person
• As Gov. of NY in 1928 he instituted
  unemployment insurance, stricter child
  labor laws, tax relief for farmers and
  pension plans for elderly
  • As depression his NY, he provided Public work
    programs and a Temporary Emergency Relief
    • These same concepts would follow him to the
FDR and the First New Deal

• In his inaugural address he said “the
  only thing we have to fear is fear itself”
  • The next day he declared a “bank holiday”
  • The purpose was to fix the banking
    industry after bad policies had caused so
    many closures
  • On March 12th he started his “fireside
    chats” which were radio broadcasts to the
    citizens explain what he was doing
  • They were very successful, and thus
    became part of his regular routine
FDR and the First New Deal

• Congress immediately passed the
  Emergency Banking Act
  • Gave the president broad powers
  • Banks were allowed to reopen after they
    received approval from the Treasury
  • By the end of March, banks were reopened
    and accepting new deposits—the banking
    crisis had ended
  • The Federal Deposit Insurance Corporation
    was created to protect deposits that were put
    into Federally backed banks
FDR and the First New Deal

• FDR didn’t come into office with a
  unified plan
  • The first “Hundred Days” of his
    administration he passed through
    extraordinary amounts of legislation to fix
    various issues
  • 7 key pieces of legislation were pushed
    through during this time
    • Some were allowed to remain, others were
      overturned by the Supreme Court
Hundred Days Legislation

 Emergency Banking        •Enlarged federal authority over private banks
     Relief Act           •Government loans to private banks

 Civilian Conservation    •Unemployment Relief
          Corps           •Conservation of Natural Resources

  Federal Emergency       •Direct federal money for relief, funneled through state and
 Relief Administration     local governments

Agricultural Adjustment   •Federal farm aid based on parity pricing and subsidy
   Tennessee Valley       •Economic development and cheap electricity for TN Valley
  National Industrial     •Self-Regulating industrial codes to revive economic
    Recovery Act           activity

     Public Works         •Federal public works projects to increase employment and
    Administration         consumer spending
Left Turn and the Second New Deal

• FDR had many critics from both the
  right and the left
  • Republicans called him a socialist
  • Democrats said his was not tough enough
    on various issues
  • Huey Long (Gov., then Sen. From LA)
    championed against FDR
    • Created the Share Our Wealth Society
    • He was going to run against him in 1936, but
      was assassinated
Left Turn and the Second New Deal

• The main goals that FDR had in his
  “Second Hundred Days” included:
  • Strengthening the national commitment to
    creating jobs
  • Providing security against old age,
    unemployment, and illness
  • Improving housing and cleaning slums
• The legislation that passed during this
  time frame became known and the
  Second New Deal
Second New Deal Legislation
The New Deal and the West

• The Great Plains in the 1930s saw the
  worst ecological disaster ever in the
  • Over the years, farmers had stripped the land
    of its natural vegetation, causing massive
    wind erosion
  • This became known as the Dust Bowl as tens
    of millions of acres of topsoil were carried off
• Effects of the Dust Bowl included:
  • Difficulty breathing
  • Limited visibility
  • Death to plants and livestock
The New Deal and the West

• To relieve issues stemming from the
  Dust Bowl, the federal government put
  moratoriums on loan payments,
  offered crop and seed loans, offered
  temporary jobs under the WPA
  • They also tried to keep farmers from
    overproducing, and tried to keep cattle off
    of drought-stricken lands
The New Deal and the West

• Another effort was the creation of the
  Soil Conservation Service, designed to
  control wind and water erosion
• All of the federal government’s effort
  was for naught:
  • Rains returned
  • World War II broke out, creating an
    increase in demand
  • Farmers returned to their old methods and
    expanded wheat production
The New Deal and the West

• Discuss Grapes of Wrath
The New Deal and the West

• Another major outcome of the New
  Deal was the development of water
  projects such as damming and
  • The most famous of these projects is the
    Hoover Dam, designed to harness to
    Colorado River
  • The dam supplies energy to California,
    Nevada, and Arizona
The New Deal and the West
The New Deal and the West
The New Deal and the West

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