Supply Side Economics

Politics of the 1920’s Warren G. Harding, 1921 - 1923 “Supply Side Economics” If govt. taxes were lower, businesses and consumers would spend and invest more money, causing the economy to grow. “Return to Normalcy” (1921) “Ohio Gang” – Daugherty, Forbes, etc. “Teapot Dome” Scandal (1922) Calvin Coolidge, 1923 - 1929 Teapot Dome Oilfield

Calvin Coolidge, 1923 - 1929 NcNary-Haugen Bill (1926) 1927 Mississippi Flood

Calvin Coolidge ** Laissez-faire economics - Is French, which literally means “allow to do.” The U.S. government’s policies of keeping state and federal taxes low, not regulating industry, and not attempting to control wages and prices.

Reading the handout, answer the following questions in your notebooks: (1) Why were farmers optimistic during WWI, and how did this lead to poor economic decisions by farmers? (2) How were the Roaring Twenties unkind to rural America? (3) Why were rural banks allowed to fail?

Problems with the Farms and Rural and Western Banks (fill in your guided notes) [1] During WWI, prices are good [2] Farmers invest [3] Overproduction [4] Crop prices drop in 1920 & 1921 [5] Hard time paying mortgages and loans [6] Farms become foreclosed [7] Rural banks fail

Write down the following prompts, leaving three lines between in preparation to watch a video about the 1920’s “Boom to Bust” (12:00 to 37:00): https://www.youtube.com/watch?v=RN7ftyZigYs (1) Impact of electricity and the automobile … (2) Credit culture of America in the 1920’s … (3) Impact of the radio … (4) Cultural tension and conflicts during the 1920’s … (5) The rise of spectator sports … Describe how popular American culture changed during the 1920’s, mentioning as many changes as possible regarding how Americans actually lived their everyday lives. (Write on next page as well.)

“Roaring Twenties” A Culture of Optimism … By end of 1920’s, majority of homes have electricity Flappers Impact of radio Impact of automobile Scopes Trial Rise of K.K.K. & Nativism

1920’s – An Era of Optimism (1) Credit culture of America in the 1920’s (2) “Buying on the Margin” – risky investments in stock market speculation (3) Farmers over-invest, taking out loans for more land and farm equipment (4) Overproduction in farm products and consumer goods

** Based upon 1890 immigration statistics. Established a 2% quota max on immigrants from select areas of the world … ** Southeast Europe, Asia, Africa were disadvantaged ** Based upon 1890 immigration statistics.

Video: “Crash Course” – Great Depression, https://www. youtube Video: “Crash Course” – Great Depression, https://www.youtube.com/watch?v=GCQfMWAikyU – first 5 minutes ** Write down these prompts in your notes in preparation for a short video clip: Installment buying … Experiences of farmers … Commercial bankers … What made the Great Depression the “Great Depression” was massive … Margin buying … Single cause possibly … Deflation is … Unemployment Weak Banking System

** Unemployment during the Great Depression? 1920 – 5.2% 1928 – 4.2% 1930 – 8.7% 1932 – 23.6% 1933 – 25% 1934 – 21.7% 1936 – 17% 1938 – 19% 1940 – 14.6% 1942 – 4.7% 1944 – 1.2% 1946 – 3.9%

Bank Failures ** Why did all of these rural banks fail? ** 600 bank failures a year between 1921 – 1929 ** Why did all of these rural banks fail?

The reduction in prices, wages, and the overall economy Video: “Crash Course” – Great Depression, https://www.youtube.com/watch?v=GCQfMWAikyU – first 5 minutes ** Write down these prompts in your notes in preparation for a short video clip: Installment buying … Experiences of farmers … Commercial bankers … What made the Great Depression the “Great Depression” was massive … Margin buying … Single cause possibly … Deflation is … The reduction in prices, wages, and the overall economy

A “Bull Market” Bull Market” due to: [1] Irrational speculation (“a new era”) [2] Buying on the Margin …

“The Great Crash” (1) Interest rates were low throughout the 1920’s Three long-term causes: (1) Interest rates were low throughout the 1920’s (2) “Buying on the margin” or borrowing to invest “The butcher, the baker, and the candlestick maker” … all were invested in the marketplace (3) Over-valued stocks & “the bubble”

“The Great Crash” “Black Tuesday,” Oct. 29, 1929 Panic in Selling of stocks Weakens Economy in Two Ways: Banks invested in the stock market, lost $$$$ (2) Weakens credit …

Deflation

Problems w/ the Banking Industry “Bank Runs” https://www.youtube.com/watch?v=iPkJH6BT7dM

Gross Domestic Product ** In billions of dollars, a figure expressing how much the economy produced. 1928 97.4 1929 103.6 1930 91.2 1931 76.5 1932 58.7 1933 56.4

Economic Problems in Europe and Political Responses Economic Problems in Europe and Political Responses ** Various forms of Keynesian Economics … ** Cutting taxes, increased govt. spending …

Keynesian Economics Recessions can be caused a drop in aggregate demand. Definition: governments should engage in “short-term deficit spending, generating economic growth.”

Germany Responds Economically to the Depression… 1933 – Germany begins the “Autobahn” 1934 – Hitler initiates build-up of military

Hoover Responds to the Great Depression Bonus Army (1932) … 40,000 war veterans want their promised bonus U.S. Army evicts veterans from Washington D.C.

Dust Bowl - “Black Sunday,” April 14, 1935 … - Causes of the storms

What got our country out of the Great Depression?

 - At the height of government spending during WWII, the national deficit was at $54.5 billion in 1943.

What he doesn’t discuss … unemployment during the Great Depression? What did solve unemployment during the Great Depression? What did return consumer confidence during the Great Depression? What actually did happen in the “REAL WORLD?” Gary Wolfram

Unemployment Rates, 1900’s According to Gary Wolfram … Did … 1920 – 5.2% 1928 – 4.2% 1930 – 8.7% 1932 – 23.6% 1933 – 25% 1934 – 21.7% 1936 – 17% 1938 – 19% 1940 – 14.6% 1942 – 4.7% 1944 – 1.2% 1946 – 3.9% According to Gary Wolfram … Increased international trade Fewer government regulations Lower corporate and personal income tax rates Did …

Franklin Roosevelt & Fireside Chats - The main topic discussed at FDR’s first “fireside chat” on March 12, 1933?

Other New Deal Topics … Franklin Roosevelt - Franklin Roosevelt’s political philosophy … - Roosevelt’s Optimism … - Fireside Chats …

New Deal Coalition - African Americans left the Republican Party - Southern whites, farmers, industrial workers, Catholics, various urban groups (Italian Americans and Irish Americans), new immigrants, ethnic minorities including Mexican Americans, unionized workers, women, and “progressives.”

** The U.S. fertility rates declined by nearly 20% from 1928 to 1935. Family Life in the Great Depression Fertility Rates, (per 100,000 women aged 15-44) - 1928: 93.8 - 1929: 89.3 - 1930: 89.2 - 1931: 84.6 - 1932: 81.7 - 1933: 76.3 - 1934: 78.5 - 1935: 77.2 Average divorce rate, (per 1,000 people) - 1920-1929: 1.6 - 1930-33: 1.4 - 1934-39: 1.8 - 1940-46: 2.8 - 1947-64: 2.5 - 1936: 75.8 - 1937: 77.1 - 1938: 79.1 - 1939: 77.6 - 1940: 79.9 - 1941: 83.4 - 1942: 91.5 - 1943: 94.3 ** The U.S. fertility rates declined by nearly 20% from 1928 to 1935. ** Divorce rates decrease, so especially for women, they stay in many unhappy marriages.

New Deal Programs - FDIC – Federal Deposit Insurance Corporation is established, which guarantees banking deposits at the time up to $5,000. - Separates commercial & investment banks

1st - Required companies to give complete information on all stock offerings (this refers to the price that the stock is worth) - 2nd - It also created the (SEC) (1934) to regulate the stock market / prevent the spread of “insider information”

Banking Reform - Securities Act of 1933 Glass-Steagall Act (1933) - Securities and Exchange Commission - Complete transparency on stock values - SEC to regulate stock market Glass-Steagall Act (1933) - Federal Deposit Insurance Corporation - FDIC guarantees banking deposits, very important!!! - Separates commercial & investment banks

- In order to reduce the supply of agricultural goods thereby raising prices … (1) Livestock are killed off, (2) Certain targeted crops, especially dairy are destroyed, and (3) Farmers are paid to conserve land

- Agricultural Adjustment Act (AAA)

- Employed men aged 18 to 25, later includes military veterans - Employed men aged 18 to 25, later includes military veterans * Paid $30, have to send $25 home to family * Developing parks and trails * Building roads and water reservoirs * Developing campgrounds * Planted trees to prevent another Dust Bowl

- Civilian Conservation Corp (CCC)

- Largest public works program of the New Deal!! * Constructed highways, roads, streets * 125,000 public buildings * Over 800 airports and 8,000 parks * Employed actors, writers, musicians, etc.

Federal Writers Project

- Helped tenant farmers displaced by AAA - Helped tenant farmers displaced by AAA * Spent $1 billion in aid to help tenant farmers work the land and buy their own land. * Most famous for photographs taken displaying the hardships of rural Americans during the Great Depression - Ron Stryker said, “I want to see the whites of their eyes.”

Farm Security Administration & “Migrant Mother” “Dust Bowl refugees?” “Oakies” States of Oklahoma, Texas, Kansas, Colorado, Arkansas, etc.

  - Stabilized the banking industry calling for a four-day bank holiday, as federal government inspectors of the banks would issue a license to those banks allowed to remain open.

Banking Reform - Emergency Relief Banking Act - 4-day bank “holiday” - Federal inspection of industry

Funded by payroll contributions from all workers and tax contributions by employers Supplemental retirement for those at 65 years of age (now eligible at ages 62, 65, and 68) Unemployment insurance to those temporarily unemployed Modest welfare payments to the needy, disabled, and poor mothers w/ dependent children

Reform Programs - Wagner Act - Protect rights of workers to unionize - Established National Labor Relations Board to investigate possible unfair labor practices