The Depression and Politics Hoover and Roosevelt

Stock Market Crash of 1929 As stock prices continued to rise, more factory owners kept investing money in production, instead of salaries. Prices continued to rise, and more people borrowed money to buy stocks, artificially raising the prices even further. Realizing they were losing money to America, the British lowered their interest rates to lure investors to Britain As small amounts of money began to go to Britain, prices began to drop slowly As prices drop, margin calls are made and prices begin to drop drastically as people hurry to sell their stocks. October 29, 1929, Black Tuesday, over 16 million shares of stocks were sold.

Hoover and the Depression Herbert Hoover’s economic beliefs were very conservative. Was a firm believer that the market would correct itself via the business cycle. Hoover received a great deal of criticism for his policies, so he sought out a compromise Calling it his“trickle-down” philosophy, Hoover would use government funding to help banks that were closing, railroads, and rural credit corporations. The idea was to make it easier on these groups to operate their businesses, and the money would “trickle down” to the working class.

Criticism of Hoover Considering the great divide between the “haves” and the “have nots” Hoover was greatly criticized for his plan. As the number of unemployed rises greatly, people begin to move into shack communities outside of the cities. These are promptly named Hoovervilles.

Roosevelt and Keynesian Economics A British economist, John Meynard Keynes, had a different theory on stimulating the economy, deficit spending It is best to get the money into the hands of the masses so that they can spend it In such circumstances, it is ok for the government to spend money outside its budget to fix such a crisis. This became the basis of Roosevelt’s New Deal.

Assignment Pick the economic policy that you feel would have best helped during the Great Depression. Write an argument for why you think this policy would have worked better Which policy do you think would be better for the current economic crisis? Explain your answer.