THE GREAT DEPRESSION Economic Causes False Prosperity

THE GREAT DEPRESSION Economic Causes

“False” Prosperity of the 1920’s • Industrial production up • Increased wealth- LOTS of new millionaires (but no middle class) • New businesses & products • Low unemployment • New investment opportunities • Little gov’t. interference

Dangers Below Surface • • • Farmers: overproduction/low prices Industry: overproduction/surplus Unequal wealth (75% live paycheck to paycheck) Poor banking practices ($$$ in market) High tariffs (slow trade) Stock market speculation: “buy on margin”

Warning Bell: Stock Market Crash • All summer: prices up (buying “on margin”) • Fall: periods of sell-offs • October 24 th: Largest one day sell off • October 28 th: “Black Tuesday” the market crashed! • Losing $160, 000 then = $1. 8 million today • Millions lost life savings • But who’s in the market? Only 2+million

Causes of the Depression • Unequal Distribution of wealth • Massive Farm Debt • Manufacturers decreased production • Results: • Mass Unemployment • 25% unemployed • Layoffs! • Banks fail due to poor investments and bank runs – deposits are not insured - “It's A Wonderful Life”: bank run (00: 21) • People lose their life savings • Stock Market Crash • http: //www. youtube. com /watch? v=Wil 1 e. Pl. T 1 xs

Unemployment Rate UP: 1929 -1943 (25% unemployed)

Other Economic Effects of Depression • Reduced hours for many • Pay cuts • Default on loan: lose homes, cars, etc. • 4, 000 Banks fail (10 mill. Savings accounts GONE) • 26, 000 Businesses close • Cut back on spending • Prices dropped (lose profits): deflation • “Ride the rails”: migrants on the move

What Does Hoover Do? • Talk confidently • Call business, labor & agric. leaders • Increase gov’t spending on federal projects • Urge state & local gov’t: “spend!” • Raise taxes (balance budget) • Raise tariffs (Hawley-Smoot Tariff) • Moratorium on debts • Reconstruction Finance Corp. :

Hoover’s philosophy • • “Rugged Individualism”: Voluntary cooperation Personal responsibility Greater Federal role: • public works projects, • Reconstruction Finance Corp. • Agricultural Marketing Act (Farm Board makes loans, new cooperatives buy up surplus) • POUR – President’s Organization of Unemployment Relief

AMERICANS REACT TO HOOVER • Hoover was increasingly unpopular, but he continued to try. . . RECONSTRUCTION FINANCE CORPORATION • 300 Million to states • had power to make emergency loans to banks • Hoover would NOT involve himself in any programs of direct gov't aid to individuals -didn't want to erode Americans sense of "RUGGED INDIVIDUALISM"

HOOVERVILLES

Biggest Political Mistake? “Bonus Army March” Incident • Bonus Army March: “we want our WW I bonuses now- not in 1945 • Camped in D. C. • Congress didn’t approve measure… 1, 000 still camped • Hoover: get them out • U. S. troops (Geo. Patton/D. Mac. Arthur) • Tanks + tear gas + force = “Heartless”

1932 Election: FDR vs. Hoover

Franklin D. Roosevelt (FDR) • 32 nd President • NY • Democrat • 4 Terms, 1933 -1945 • Handicapped from Polo • President during GD and WWII • Gave people hope and confidence during the GD

Hoover & FDR

• 1932 ELECTION • 1 out of 4 unemployed… • Nat'l income was 50% of what it had been in 1929 • Republicans. nominated Hoover no hope • winner by a landslide = FRANKLIN DELANO ROOSEVELT (Dem - N. Y. governor) • Inauguration - Extra! Special! Roosevelt Inaugurated 1933/03/05 (1933) (7: 43)