Chapter 23 The Great Depression

Questions to think About What were some of the causes of the Great Depression? What made it so severe, and why did it last so long? What was the impact of the depression on farmers, minorities, and women? How did President Hoover and his administration try to deal with the Depression? What was the results of those efforts?

Causes of Great Depression

Bank Runs Easy Credit Domestic Reasons Fractional Reserve Lending Reduced Consumer Spending Fractional Reserve Lending Buying on Margin Loans for Stock Purchase Easy Credit Bank Runs Over-Production

Inflation BANK of England Overseas Reasons WWI Reparations International Debt High American Tariffs Inflation

International Monetary Policy During WWI Countries go off the Gold Standard British Central Bank looks to keep their dominance over world Financial markets through the League of Nations They were trying to protect their gold

If return to Gold Standard After WWI Why? Before WWI 1 Pound = $4.86 After 1 Pound = $3.50 If return to Gold Standard No Gold Standard 30% Loss

All Countries Inflate Currencies to keep prices competitive Britain’s Problem British Manufacturers Could not cut wages because of Unions creating less Profits All Countries Inflate Currencies to keep prices competitive Gold Prices Rise

Keep Pounds at Inflated Level Britain’s Scheme Want to save Exports Keep Pounds at Inflated Level High Tariffs British Manufacturers Could not cut wages because of Unions so they need low prices

Germany redeems Pounds for Gold to pay loans The Collapse Loans Germany redeems Pounds for Gold to pay loans

Germany redeems Pounds for Gold to pay loans The Collapse Germany redeems Pounds for Gold to pay loans With Less Reserves US Banks begin to Collapse Margin Calls

“The Crash” “Black Tuesday” October 29th 1929 Panic $40 Billion lost Banks close Unemployment goes to 20% Farms close

Public Works President Hoover’s Solution Smoot-Hawley Tariff President Hoover’s Solution Reconstruction Finance Corporation “Loan Program” Voluntarism “No cuts to hours or wages” Agricultural Marketing Act “Parity” Public Works “Hoovervilles”

Bonus Army 1932 20,000 vets go to DC to demand payment Hoover sends army to evacuate Vets Riot ensues Makes Hoover Look Bad Hoover is blamed for Depression