Recap – Buying on Credit Buy now, pay later Businesses give easy credit; consumers pile up large debts Consumers have trouble paying off debt, cut back on spending

The Stock Market  1920: stock prices rise steadily; people rush to buy stocks, bonds  Many engage in speculation = buy on the chance of making a quick profit  Buying on margin: pay small % of price, borrow rest

The Stock Market Crashes October 29, 1929 (Black Tuesday) Shareholders sell frantically; millions of shares have no buyers People who bought on credit left with huge debts Others lose most of their savings

The Great Depression  Great Depression: economy plummets, unemployment skyrockets  1929–1940  Factors leading to Great Depression:  tariffs, war debts, farm problems, easy credit, income gap

Bank and Business Failures  People panic, withdraw $$ from banks  Banks that invested in stocks fail; people lose $  : gross national product cut nearly in ½  90,000 businesses go bankrupt  1933: 25% of workers jobless; those with jobs have hours and pay cut

Worldwide Impact  Great Depression limits U.S. ability to buy European goods  Hawley-Smoot Tariff Act: highest protective tariff in U.S. history  International trade drops; unemployment soars around world

Social Effects of the Depression People give up health care, college, put off marriage & children – all cost $$ 1928–1932: suicide rate rises over 30% Admissions to state mental hospitals triple

Hoover’s Economic Theories Many think depression is normal part of business cycle President Hoover says economy is still okay Gov’t should encourage cooperation between competing groups People should take care of their own families, not depend on gov’t

Hoover Tries Reassurance  Asks business, banking, and labor leaders to solve problems  Creates organizations to help private charities raise money for poor  “Boulder Dam” built on the Colorado River  Provides electricity, flood control, and water to states on river basin … and provides JOBS  Later renamed Hoover Dam

Election of 1932  Democrats nominate NY Governor Franklin Delano Roosevelt  FDR wins by overwhelming majority

The New Deal  New Deal: FDR’s plan for economic recovery and reform  The Hundred Days – passes over 15 New Deal laws in first 100 days in Office Example:  Emergency Banking Relief Act allows Treasury Dept. to inspect banks  Decide which are failing, need loans, or are sound  Revives public confidence in banks

Fireside Chats  Gave “fireside” radio addresses explaining New Deal acts  Discusses need for public support of gov’t and banks  People feel a connection with President and gain faith in New Deal

Regulating Banking and Finance  Glass-Steagall Act establishes Federal Deposit Insurance Corporation (FDIC)  insures individual bank accounts, regulates banking practices  Federal Securities Act: companies must give all information on stocks  Securities and Exchange Commission (SEC) created to regulate stock market  Federal Housing Administration (FHA) gives loans for mortgages, repairs

Adding to “Alphabet Soup”  Civilian Conservation Corps - public works jobs for young men  Agricultural Adjustment Act (AAA) raises food prices, lowers supply  Tennessee Valley Authority (TVA) creates jobs renovating, building dams  Civil Works Administration - builds rural schools, pays teachers

Opposition to the New Deal  Deficit spending: spending more $$ than gov’t takes in  Funds New Deal  Policy still used today  Liberals: New Deal doesn’t do enough to help poor, fix economy  Conservatives: New Deal used to control business, socialize economy

The Second Hundred Days FDR launches second phase  more relief for farmers, workers 1936: FDR reelected, Democrats win large majorities in both houses First time most African Americans vote Democratic

Improving Labor  1935: Social Security Act creates Social Security system  insurance for retirees 65 or older  unemployment compensation  aid to disabled, families with children

The New Deal Ends  1939: New Deal over (mainly for $$ reasons)  Supporters: FDR helped country recover from economic difficulties  Conservatives: FDR made federal gov’t too large  Liberals: FDR didn’t do enough to end inequalities

Government’s New Role  FDR expanded power of president and federal gov’t  FDIC still protects investors; SEC still regulates investments and monitors stock market  New Deal does not end Depression  Federal gov’t goes deeply into debt to create jobs and give aid  Massive spending on equipment/supplies for WWII ends Depression

Depression in Rural America 400,000 farms lost to foreclosure  Many become tenant farmers –rent land from someone else  Farmers in Great Plains exhausted land through overuse  Drought and windstorms hit make problem worse  Dust Bowl: area from North Dakota to Texas hardest hit  Many families migrate to Pacific Coast states

The Black Blizzard bowl/videos#black-blizzard FDR’s Fireside Chat on the Dust Bowl on-dust-bowl#fdrs-fireside-chat-on-dust-bowl