The Great Depression

Main Causes of the Great Depression Production exceeds demand Wealth inequality Collapse of the farm industry Limited Government Regulation Stock Market Speculation

Federal Reserve (Fed) Worsens Depression Fed in charge of monetary policy-policies or actions that affect the supply of money During 1920s, Fed has “expansionary monetary policy” Low interest rates-easy to borrow money Helps Fuel stock market speculation – people “buy on the margin” After Black Tuesday, Fed tightens money supply Raises interest rates, harder to borrow money When America needed an economic boost, the Fed slowed down the economy more.

Federal Gov’t Worsens Depression 1930 Hawley-Smoot tariff passed Shuts down international trade President Hoover does nothing Asks companies to voluntarily maintain employment/wages (they don’t) “Prosperity is just around the corner”

Effects of the Great Depression Worst economic crisis in United States Unemployment 25% (1 out of 4 people unemployed) No unemployment insurance Hundreds of Thousands loose homes

When a large amount of people try to withdraw savings from a bank, causing it to close. People lose confidence in banks People attempt to withdraw savings from Banks Causes more banks to collapse People lose even more confidence in Banks People withdraw savings from more banks Some banks collapse due to Black Tuesday Bank Runs

Bank Runs

Economic Death Spiral Workers fired/wages cut Demand decreases Prices lower Workers fired/wages cut Demand decreases further Prices lowered further More workers fired/wages cut Demand decreases Economic Death Spiral

Critical thinking question What possible solution is there for this economic death spiral???

Soup Kitchen and Bread Lines First started by churches/private charities Local/state gov’ts begin to open them as well. Only real form of government assistance under President Hoover.

Dust Bowl Great Plains damaged by overgrazing Demand for grain in WWI causes over plowing Top soil becomes very fragile Severe drought + Strong winds beginning in 1931, blow away top soil Soil becomes useless “Okies” move West

Significance: People again demand support from federal government The Bonus Army After WWI, veterans promised a bonus payment in 1945 In 1932, veterans march on D.C. demand bonus be paid early Crowd 40,000+ on Pennsylvania Avenue Hoover uses army to disband protest https://www.youtube.com/watch?v=sNOsIB5VMSQ Political Revolution ????????? Significance: People again demand support from federal government

Franklin Delano Roosevelt (FDR) Herbert Hoover Election of 1932 Franklin Delano Roosevelt (FDR) Main Issue: -> The Depression -Party: Republican -Opposed gov’t intervention in the economy/gov’t aid for poor Believes FDR’s program will prolong Depression. -Party: Democrat -Plans to use federal gov’t resources to end Depression -“I pledge you, I pledge myself, to a New Deal for the American people” Wins by landslide

FDR Innaguration What did FDR mean by the quote above? https://www.youtube.com/watch?v=nHFTtz3uucY “The only thing we have to fear is fear itself.” What did FDR mean by the quote above?

FDR and New Deal FDR has mandate to fix economy Mandate-> political authority to solve an issue(s) based off of popular support from voters. New Deal: FDR’s policies from 1933-1939, to reform and rebuild the American economy. -> vastly increases the powers of federal government. -> provides direct federal aid to suffering people -> rejects llaissez fair capitalism, promotes gov’t regulation of economy.

Significance of New Deal DOES NOT END THE GREAT DEPRESSION: ends with WWII. Restores people’s faith in American gov’t Does alleviate some economic suffering: puts people to work Reforms help prevent future economic depressions

FDR Solves Banking Crisis Implements Banking Holiday, March 6-10 Launches nationwide “Fireside chats”, -> Roosevelt speaks directly with Americans over radio -> explains banking crisis Creates FDIC (Federal Deposit Insurance Corporation 1933): insures deposits up to a certain amount, Confidence restored in banking system

FDR’s Court Packing Scheme Several pieces of New Deal legislation struck down by SCOTUS FDR proposes plan to pack court with sympathetic judges Introduces bill to add a new justice every time an existing justice turned 70. Never passed, but Court takes notice and stops declaring New Deal laws unconstitutional

Criticisms of the New Deal Criticisms from Democrats (The Left) Argue that the New Deal did not go far enough to help the poor and reform the nation’s economic system Father Charles Coughlin Radio priest from Detroit Wants to nationalize banking system (FDR disagrees) Blames Great Depression on a Jewish conspiracy Huey “Kingfish” Long Louisiana politician, rival to Roosevelt “Share our Wealth” plan to place huge taxes on the rich Assassinated in 1935

Criticisms of the New Deal Criticisms from Republicans (the right) Critics: Wealthy/Business owners Believed FDR had become too powerful-> dictator-> leader with no limits on power Programs gave federal government too much control over the economy Creates an unbalanced budget