April 22 st, 2009  Happy Earth Day!  Do Now: hw & notes out  HW: New Deal Packet  Quiz

The Great Depression What were the causes of the Great Depression and how did the depression affect the lives of Americans?

I. Causes to the Depression & Crash A. Weak Economy:  What is a depression ? Severe economic decline marked by business failures, high unemployment & low production & prices.  Stock Market measures health of economy / business by  buying and selling stock (supply and demand.) 1) Overproduction Under consumption 2) Over expansion of credit Buying stocks “on the margin” 3) Unregulated banks

Stock Market measures health of economy / business by buying and selling stock (supply and demand.) Stock- ownership in company. New York Stock Exchange

B. The Crash  10/29/29-  Prices drop dramatically  16.5 million shares a loss  Consequences:  A) 30 billion wiped out (income drops by 40%)  B) Investors who bought on the margin went bankrupt  C) banks failed because loans not repaid  D) Factories lay off workers  E) People lost confidence in the economy

Expansion *Increase production *Wages high Case in Point: Model T Ford + + Henry Ford’s company mass produces Model T. Assembly line production makes the process quick and affordable. Company makes money, investors make money, workers make money…. WHAT HAPPENS WHEN EVERYONE WHO WANTS A MODEL T HAS ALREADY PURCHASED ONE????

Case in Point: Model T Ford = Henry Ford’s company meets the demand for Model T. Supply meets Demand. Peak (Supply meets demand) WHAT WOULD HAPPEN IF HENRY FORD CONTINUED PRODUCING MODEL T’s AT THE SAME RATE DURING PEAK AS HE HAD DURING EXPANSION?

Case in Point: Model T Ford - Henry Ford must reduce production to meet lower demand for Model T. Company does not make as much money, investors do not make as much money, and some workers may be laid off. Recession (Business Slump) *Decrease Production *Decrease Wages *Layoffs

II. World Wide Effects  WWI created an economic imbalance  US worlds “creditor” nation  1929-Europe linked financially to US US banks /business loans helps Europeans to pay back war debts.  After Crash:  Hawley-Smoot Tariff-Problem?  High protective tariff that produced retaliatory tariffs in other countries, strangling world trade.

Dawes Plan and Young Plan- U.S. loans money to Germany to pay reparations, ends after stock market crash. What is strange about this financial arrangement?

III. Political Repercussion  Limited role of gov’t  “rugged individualism”  Voluntary aid (neighbor helping neighbor)  Gov’t help would destroy ppl’s self respect  Insisted things would get better soon…“no one is actually starving” Herbert Hoover (R) ( ) What is the problem with Hoover’s approach?

B. Attempts to revive the economy  Trickle-Down Theory as business improves so benefits will trickle down to the public 1) cut taxes to spur buying 2) Increase gov’t spending on public projects 3) Reconstruction Finance Corp. Help RR, banks, & insurance co. so they won’t go bankrupt 4) debt moratorium-temp. halt of payments of war debts

IV. Impact of Depression A. unemployment  million (25%) unemployed  Decrease wages, decreased farm prices  5k banks failed  86K business fail

Farmers worst hit by Great Depression. New machinery increased crop yields, but surpluses meant crop prices remained low— Mortgaged farms are lost.

How did massive unemployment impact the nation’s psychological state?

Feelings of shame, depression, hopelessness.

 Bonus Army- 20,000 WWI vets protest in D.C.  They want pensions, a few violent skirmishes & army  is called in.  “Hoovervilles”- homeless who sleep in shanty towns

B. Other effects:  Women & minorities lose jobs  Dust Bowl- ( ) Farmer’s plight in Great Plains made worse by drought and the consequent dust storms  25% of farmers migrate out of “Dust Bowl.”  “Okies” escape the dust storms and move to California.  (Steinbeck’s novel, Grapes of Wrath)

Black Blizzard

Dust storm approaching Stratford, Texas

Consumed by “Dust Bowl”- “dust pneumonia,” brown snow reaches northeast.

Hoover (R)FDR (D) V. Election of 1932 Why did FDR win by such a wide margin in 1932? FDR offered a NEW DEAL for the American people.

Active role of gov’t: FDR New Deal- gov’t programs to solve problems of Great Depression and put people back to work. 3 “R’s” : Relief, Recovery, Reform VI. What’s the deal with the New Deal? Franklin Delano Roosevelt (D) ( )

At inauguration, FDR rallied a frightened nation in which 1 in 4 workers were unemployed. “We have nothing to fear, but fear itself.”

 A. “New Deal” :  Vast collection of programs formulated to combat the Depression, influencing social, political & cultural attitudes in the US, commitment to gov’t action  3 R’s of the New Deal  Relief: short-term actions designed to tide ppl over until economy recovered  Recovery: economic aid to stimulate the economy ”pump-priming”, increase incentives to produce & rebuild ppl’s purchasing power  Reform: remedying the defects in the structure of the US economy, create new agencies. Gov’t job is to protect the ppl against risks they couldn’t handle themselves