The Great Depression and the New Deal

Between 1920 and 1929, US economy grew ▪ Low Unemployment; people had plenty of money ▪ Businesses grew as people bought cars, radios, and other durable goods. ▪ The stock market quadrupled in value. “The chief business of the American people is business.” ~ Calvin Coolidge

Buying on Credit ▪ Many people purchased homes, cars, and other goods on credit. ▪ Extended to stocks; many people borrowed money to buy stocks ▪ Buying stocks on credit was called “buying on margin”

The Crash of 1929 ▪ During most of the 1920s, stock prices rose ▪ Eager investors helped stock prices skyrocket ▪ In Sept some cautious investors began to sell – They worried about inflated prices ▪ The selling continued slowly into October – In that month sellers outnumbered buyers

Black Tuesday ▪ Panic spread & the market crashed on Tuesday, October 29, 1929, (Black Tuesday) ▪ Prices of stocks plunged – Everyone sold no matter what the price – Fortunes of many people vanished in hours

The stock market crash begins the Great Depression. It is the worst economic downturn in American history.

Causes of the Great Depression Imbalance between supply & demand ▪ More goods were produced than could be bought---most consumers couldn't afford them; too much supply of goods ▪ Stock market crash made consumers afraid to buy anything; not enough demand for goods

A weak banking system ▪ Banks made risky loans ▪ Banks fail--- borrowers couldn't pay back loans ▪ Failing banks = people withdraw their $$$$$$ ▪ Nearly 5,000 banks closed from ▪ People lose billions in savings Causes of the Great Depression

World trade declined rapidly in late 1920s & early 1930s ▪ Partly because of high US tariffs ▪ Partly because of the decreased US demand for goods ▪ Weakened European economies are really bad Causes of the Great Depression

What do you think... What previous event would make European economies, like Germany, weak?

What happens to income and spending from ? What happens to the unemployment rate from ? How does this connect to what we discussed yesterday?

Impact of the Depression ▪ People had no food or clothes – many stood in breadlines provided by charities ▪ People lose homes, cars, or were evicted when they didn't pay rent ▪ Many people hitchhiked from city to city searching for jobs; 25% unemployment rate

Impact of the Depression ▪ Homeless gathered in shantytowns called Hoovervilles ▪ Depression reduced people's standard of living & lowered their sense of personal worth Depression described our mood as much as our economy

The Dust Bowl ▪ The Great Plains suffered a terrible drought in the 1930’s. ▪ Dried up crops in OK, KS, CO, NM, and TX ▪ Forces many families to leave the farm to become migrant workers

Hoover Reacts to Depression ▪ He believed the govt. should not get involved in helping the economy – Said the depression was “a temporary halt in the prosperity of a great people” – Said public confidence was the key – “What the country needs is a good big laugh.”

Hoover Reacts to Depression ▪ Hoover refused to allow government to help people suffering from the depression ▪ He said it would reduce their self-respect ▪ He favored funding public works projects to create jobs – Hoover Dam

What would you do... If you were Hoover, how would you deal with the Great Depression?

People Protest the Depression ▪ Largest protest came from WWI veterans – Had been promised a “bonus” in 1945 – Decided to cash in their bonus early – Thousands (Bonus Army) marched to Washington to demand their “bonus”

People Protest the Depression – Ordered the army to clear them out – With tear gas the men & their families were chased away & their tents were burned – Ruined public opinion for Hoover

Election of 1932 ▪ Hoover was re-nominated by the Republicans ▪ Democrat challenger was Franklin D. Roosevelt ▪ He promised a “New Deal” for all Americans in his campaign ▪ FDR won by a landslide