1. The Politics of Boom and Bust
Period 7.5

2. After WWI, Americans wanted to separate from the problems in Europe and sink back into isolationism .
However, U.S. isolationism was selective because the USA did play a role in world affairs
The U.S. hosted a naval conference aimed to reduce the military strength of all nations
The USA loaned European nations billions of dollars to help rebuild after WWI
The USA joined other world powers in a commitment to world peace by signing the Kellogg-Briand Pact, which “oulawed” war as an offensive means

3. Unraveling the Debt Knot
Britain and France
Demand rapid reparation payments from Germany as outlined in the War Guilt Clause in the Treaty of Versailles
Germany prints money to try to pay the war debt, but Britain and France then demand repayment in gold.

4. Repaying Reparations 1924 - Charles Dawes engineered the Dawes Plan
It softened the burdens of war reparations in order to stabilize the German currency (somewhat)
brought increased foreign investments and loans (particularly from the U.S.) to the German market
BUT, it made Germany dependent on America’s economy (not good once the Great Depression started

6. The Republican “Old Guard” Returns
Warren G. Harding (Republican) was elected president in 1920, and promise Americans “A return to normalcy”
Americans voted for conservative Republican presidents in the 1920s because:
They had grown tired of all the Progressive reforms of the early 1900s
Many believed Woodrow Wilson had been dishonest about getting the U.S. involved in WWI, and had over stepped his presidential powers during the war.

7. Politics in the 1920s
The Republican Presidents of the 1920s were pro business and supported a more laissez-faire approach to economics, which meant the government would not interfere with business.
In the 1920s, businesses had been stifled under the progressive administrations of Roosevelt, Taft and Wilson, but now they could begin expand and grow again
Anti-trust laws were not as enforced as they had been under the Wilson Administration

8. Hiking the Tariff Higher
Fordney-McCumber Tariff Law
raised the tariff from 27% to 35%
Kept cheap European products from flooding American markets
Protected American manufacturers, but raised the prices of goods for the consumers

9. Scandals in the Harding Administration
Teapot Dome Scandal (Teapot Dome, Wyoming)
Albert B. Fall - Secretary of the Interior (appointed by Harding)
What he was supposed to do:
Lease government owned oil land to the highest bidding oil company
What he did do:
Did not allow open bidding for the land
Sold the land at a lower cost than the bidding would have brought
Received monetary compensation (bribes) from the oil companies to do so

10. Harding Dies President Harding
Died 2½ years into his presidency, before news of the Teapot Dome Scandal came to light
VP Calvin Coolidge becomes President after the death of Harding, and continues with the pro-business policies of his predecessor.
“The chief business of the American people is business.”
-Calvin Coolidge

11. Problems in the Economy
On the surface of the 1920s, the economy seemed to be booming, but there were some severe problems developing.
Problem 1 – Distribution of Wealth in the 1920s
An income of $2,500 per year was considered the minimum amount needed for a decent standard of living

12. Frustrated Farmers Problem 2 – A crisis in the farming sector
During World War I, demand for American grown food was high, and farmers profited by producing more food.
After the war, demand for the crops dropped, but many farmers continued producing crops at the same rate.
Too many crops on the market (high supply + low demand = falling prices)
Many American farmers fell into poverty and went bankrupt

14. Bailing out the Farmers… Sort of
McNary-Haugen Bill
Attempted to raise the price of agricultural goods by authorizing the government to buy up surpluses and sell them on the world market at a loss
Essentially this was a taxpayer funded bailout of the farmers because the government used taxpayer money to purchase the goods at an artificially high price knowing that they were going to lose money when they resold the crops.
This was a short-term solution to a long-term problem

15. Problem 3 – Over speculation of the stock-market
Stock speculating – investing in a stock and hoping it will go up in price without actually do due diligence
Buying on margin – people would buy stock from a broker with a small down payment, putting the rest on a line of credit.
People in the 1920s were using the stock market as a way to try and get rich quick.
People aimlessly threw their money into the stock market, and the increase demand for stocks inflated the price of stocks well over what they were actually worth, creating an economic bubble.

16. Buying On Margin

17. The Triumph of Herbert Hoover, 1928
In 1928, Calvin Coolidge chooses not to re-run for President, and the Republicans nominated Herbert Hoover
Hoover had risen to American political prominence as head of the massively successful Food Administration during WWI
Hoover wins in a landslide (444 electoral votes to 87).

18. President Hoover’s First Moves
Hawley-Smoot Tariff of 1930
raised the tariff to an unbelievable 60%!
This was a big plus for American manufacturing, but raised consumer prices dramatically, and gave incentive to other countries to not trade with the U.S.
The decline in foreign trade hurt the economy even worse.

19. The Great Depression led to a global depression in Europe, Asia, and Latin America
World trade fell by 40%
To encourage citizens to buy from U.S. companies (not foreign competitors) the government passed new high tariffs…
…European nations responded with their own tariffs which made it difficult for U.S. companies to sell their goods overseas

20. The Great Crash Ends the Golden Twenties
October 29, 1929 (Black Tuesday)
a devastating stock market crash

21. Great Depression Comes Fast
By the end of the 1930
4 million Americans were jobless
two years later, that number shot up to 12 million (25% unemployment as an average across the entire country)
Over 5,000 banks collapsed across the U.S.
Homeless and hungry people began to form lines at soup kitchens and at homeless shelters

25. Hoovervilles and Shantytowns
Villages of shanties, or homemade shacks spring up in all major American cities.
Central Park in NYC was home to the biggest “Hooverville”

26. Rugged Times for Rugged Individualists
President Hoover unfairly received the brunt of the blame for the Great Depression even though he had only been president for 6 months at the time of the stock market crash.
Hoover also didn’t act aggressively to combat the depression like he should have
Instead of government intervention to ease the pain of depression Hoover advocated charity from the wealthy and “rugged individualism”
(Rugged Individualism was Hoover’s belief that the people needed to help themselves and not look to the government for economic relief)

27. Hoover private charities to help (“volunteerism”)
When the Great Depression began, Republican President Herbert Hoover tried to solve America’s economic problems
President Hoover believed that America could overcome the depression through “rugged individualism” (using hard work and perseverance)
Hoover private charities to help (“volunteerism”)
He encouraged business growth, wanted to keep taxes low, and avoided direct gov’t intervention
Woody Guthrie

28. Under Hoover, the gov’t issued relief checks to help the unemployed
As the depression worsened, Hoover called for more direct government action to ease peoples’ suffering
Under Hoover, the gov’t issued relief checks to help the unemployed
Congress created the Reconstruction Finance Corps (RFC) to loan money to save failing businesses

29. Congress approved new building projects to put Americans to work like the Hoover Dam

30. These efforts did not end the depression and many citizens lost faith in President Hoover

31. Americans who lost their homes, lived in shantytowns nicknamed “Hoovervilles”
“Hoover Hotels”
“Hoover Blankets”
“Hooverville”

32. Routing the Bonus Army in Washington
After WWI, Veterans had been promised a Government pension from the U.S. government that would be paid to them starting in 1945.
“Bonus Army”
In 1933, thousands of WWI Veterans marched on Washington D.C. to demand that the government pay them the war bonus 12 years before it was owed to them
Riots followed after Congress failed to pass a bill that would agree to pay them their Bonus pay early

33. Routing the Bonus Army
President Hoover falsely charged that the force was led by communists anarchists, and called in General Douglas MacArthur and his military forces to disband the “Bonus Army”
Their camp was burned
Tear gas was used to disperse the Bonus Army
After Hoover’s handling of the Bonus Army became public, American opinion turned against him even more and made his reelection in 1932 nearly impossible.

34. By the election of 1932, Americans were looking for new leadership and a president who could save them from the Great Depression