Great Depression and New Deal VUS.9c

Great Depression Vocabulary Over-speculation Hawley-Smoot Act causes of the Great Depression New Deal Works Progress Administration Agricultural Adjustment Act Federal Deposit Insurance Corporation Social Security Act Business cycle Oct. 29, 1929 arbitrator Hooverville Hobo soup kitchen/bread line Securities and Exchange Commission

Business Cycle The term used to describe the periodic ups and downs of economic activity

Causes of the Great Depression Cause No. 1 Over-speculation on stocks using borrowed money that could not be repaid when the Stock Market crashed in 1929 and stock prices collapsed

Cause No. 2 The Federal Reserve System’s failure to prevent widespread collapse of the nation’s banking system in the late 1920s and early 1930s. This led to a severe contraction of the amount of money in circulation.

Cause No. 3 High protective tariffs that produced retaliatory tariffs in other countries. This strangled world trade –Ex. Hawley-Smoot Act (Tariff Act of 1930)

Secondary Causes Uneven Distribution of wealth –Two percent of the population controlled 90% of the wealth. Half of the nations families earned less than $1,500 a year. They had earned between $5,000 and $7,000 during the mid 1920s

Buying Stocks on margin –the practice of buying parts of the stock for a small down-payment and borrowing the money for the full price

Impact of the Great Depression Unemployment and homelessness –as consumers became unable to buy goods or pay for services, businesses began to close

–as businesses closed, Americans were unable to pay for their homes. Banks and companies foreclosed on homes and farms

Collapse of Financial System (Bank closings) Hundreds of thousands of bankruptcies and foreclosures –Banks closed because they had made their own bad loans and investments.

–They were forced to close when they did not have enough currency on hand to conduct business. Customers lost most if not all their deposits

Labor unions Political unrest and a growing militancy among labor unions –strikes turned increasingly violent as workers protested wages and hours.

–Employers refused to meet with strikers or workers as their profits decreased

Farm foreclosures and migration –farmers were still producing at the WWI rate and prices fell as surpluses built.

–Many Farmers on the Great Plains will also have to contend with the Dust Bowl (which had occurred because of back to back droughts and over-farming

Dust Bowl the region extending from Texas to North Dakota land was made worthless for farming by drought and dust storms during the 1930s many farmers will leave their land and move west

–Farmers were forced to turn over their land to the banks they had borrowed money from during the late teens and early 20s

–They will then move to cities seeking work or become migrant farm workers (workers who follow the season-- planting or harvesting)

Hoovervilles –another name for the little settlements on the edge of cities consisting primarily of shacks. Also known as shantytowns

–Hobos –another name for the individuals who inhabited the shanytowns and hopped trains from place to place looking for work

Soup Kitchens and Bread lines became common sights in most cities –places where food was offered free to the needy. –Usually provided by charitable organizations and public agencies

–Bonus Army a group of unemployed World War I veterans and their families marched on Washington D.C. In 1932 to demand immediate payment of a bonus they had been promised for their military service

Hoover ordered the Army to break them up It will cost Hoover the last of his popularity

Roosevelt’s NEW DEAL Changed the role of the government to a more active participant in trying to solve problems FDR rallied a frightened nation in which one out of four were unemployed (“The only thing we have to fear, is fear itself.”)

FDR’s Goals for the NEW DEAL Three goals of the NEW DEAL –Relief, –Recovery –Reform

Relief Relief measures provided DIRECT payments to people for immediate help. Works Progress Administration--WPA

WPA was headed by Harry Hopkins, provided jobs in many areas. –set out to create as many jobs as possible as quickly as possible

Recovery Recovery programs were designed to bring the nation out of the Great Depression over time

Agricultural Adjustment Act--AAA AAA paid farmers for NOT growing crops Declared unconstitutional by the Supreme Court

Reform Reform measures corrected unsound practices in banking, industry, and business Federal Deposit Insurance Corporation--FDIC FDIC protected bank deposits up to $5,000 ($100,000 today)

Securities and Exchange Commission (SEC) –established in 1934 to supervise stock exchanges and to protect investors against dishonest practices by stockbrokers and by publicly held corporations

Social Security Act--offered a safeguard for workers –provided for the payment of pensions to aged persons and set up a cooperative federal-state program of unemployment insurance

FDR is not able to end the Great Depression. We were still in it when WW II began. FDR was able to calm people’s fears and give them hope

Wagner Act Passed during the New Deal Protected the rights of labor unions to bargain collectively and to organize Gave unions incredible power