1. Politics of Boom and Bust

2. The Republican “Old Guard” Returns
Harding said America needed “Return to Normalcy” – elected 1921
People don’t want changes of Progressives
Ohio Gang
Harding’s corrupt friends were put into government offices- much like Grant
Harding believed in laissez-faire
limited government
Change From- “Old” laissez-faire: Government does NOT regulate economy at all
To- “New” laissez-faire: government helps businesses make profits
Anti-trust legislation was frequently ignored
Cooperation amongst businesses were encouraged if they supported efficiencies even at the expense of competition or free trade

3. Stench of Scandal Veteran’s Bureau (1923)
Charles Forbes stole money from building of veteran’s hospitals
Teapot Dome Scandal
Interior Secretary Albert Fall
Allowed oil companies led by Harry Sinclair and Edward Doheny pay him for rights to drill on federal land
Paid in cash, stocks, bonds
Both Sinclair and Doheny were acquitted in court
Symbolize corruption of era
Attorney General Daugherty was investigated for selling pardons and liquor permits

4. Calvin Coolidge
Calvin Coolidge becomes President when Harding dies of a heart attack
Silent Cal, No nonsense, typical New England – hard work, thrifty
Pledge to clean up corruption of Harding presidency
Domestic Policies
Believe if people work hard, they will succeed
Government should not help poor, charities should
Laissez Faire towards big business
Work with businesses, not against

5. Frustrated Farmers Farmers suffer through difficult economic times
End of World War I drastically reduced prices because of increased competition, reduced demand and the elimination of government protections
Mechanization of farming such as tractors and reaper resulted in increased production
Farmer’s blocs created to pass laws to protect farmers
Capper-Volstead Act – exempted farmers from anti-trust laws
McNary-Haugen Bill would subsidize crops to keep prices higher
Government hold crops or sell them overseas

6. Foreign Policy Flounderings
US Isolationism in Europe
Does not follow the World Court; limited compliance with naval disarmament
Dollar Diplomacy
Policy to use financial and trade incentives to further American interests
US Intervention in Latin America
US sent military to Dominican Republic, Nicaragua, Mexico and others to protect American interests
European debt
France struggled repaying WWI debt and Germany struggled with reparations
US refused to allow debt cancellation
Dawes Plan (1924)
US extended German reparations and loaned Germans money to repay Britain and France who then paid America
Worked as long as US could extend credit
US credit ended with stock market crash
US was blamed for international crisis

7. 1928 Election Herbert Hoover Republican
Favored Prohibition (Dry candidate)
Would continue pro-business policies of Coolidge
“Chicken in every pot, a car in every garage”
Successful communicator through radio
Self made millionaire and business owner
Herbert Hoover
Al Smith

8. Hoover’s First Moves
Farmers did not benefit from booming economy and demanded support
Agricultural Marketing Bill (1929)
Designed to help farmers help themselves
Created Federal Farm Board
Fund to buy sell and store agricultural surpluses
Grain Stabilization Corp; Cotton Stabilization Corp
Organized to buy surplus to increase price
Hawley Smoot Tariff (1930)
Highest protective tariff for American industry in history
Effect was US exports and imports cut in half
It pushed US and other nations towards depression
WHAT DO OTHER NATIONS DO WHEN THE US HAS HIGH TARIFFS?

9. Stock Market Crash
Speculation- Investors buy stocks hoping price increases resulting in dividends
Margin buying
Borrow money to pay for stock, pay it back with dividends
Bubble
When price of product exceeds its value
Black (more like gray) Thursday - October 24, 1929
Stock prices begin to fall
Margin calls cause many to sell
Need to sell increases as prices fall
Bankers met and agreed to buy stocks at inflated prices to stop panic
Temporarily worked
Black Tuesday - October 29, 1929
Severe drop in the market
General Motors dropped from $73 to $8
$40 billion lost in 2 months

10. Problems in Economy Gap between Rich and Poor
Production of factories increase
Profits of wealthy shot up
Wages of workers stayed same
Stock market crashed
Wealthy stopped investing
Average people could not buy products
Resulted in factories closing and
unemployment
Foreign countries struggled paying back money borrowed from America for War
Holding companies owned stock in many companies
Interested in stock prices, not running companies

11. Great Depression Stock market crash led to collapse of industry
Part of world-wide depression
1 in 4 Americans unemployed – over 12 million lost jobs
Many became homeless
Some moved in shantytowns – Hoovervilles
Soup kitchens and bread lines became common
HoBo’s; “Hoover Blankets”; Brother Can You Spare a Dime
Run on Banks (over 5,000 banks closed)
Federal Reserve Act (1913)
Was supposed to give banks a reserve to prevent bank failures
Drop in farm prices meant farmers couldn’t pay back loans
Increased tariffs meant fewer foreign companies deposits
Banks did not have money to cover withdrawals
Resulted in failure of banks
Central Park, NYC

12. Causes of Depression Farm Debt Farmers needed loans to pay for farming
When farmers couldn’t repay bank, foreclosed the farm when loans weren’t paid then sold farm and its equipment
Farmer was left with nothing
Droughts destroyed crops in 1930
Decline in Trade
US raised tariffs to protect American businesses
1930 – Hawley Smoot Tariff – highest tariff in history
Other nations responded by limiting trade with the US
Europe also struggled with reparations and War debt
Consumer Debt
Installment buying and margin buying increased personal debt
Overproduction
More goods than buyers
Overproduction drove prices down
Profits reinvested into factories and production instead of wages
New technologies created unemployment

13. Bonus Army
World War I veterans marched on Washington demanding their bonuses be paid early
Were not supposed to be paid until 1945
20,000 veterans went to Washington in 1932
Hoover responded by sending Army led by Douglas MacArthur to disperse them with bayonets and tear gas

14. Japan Invades Manchuria (in China)
Japan invaded Manchuria in China in September 1931.
Assumed Europe and America would not be able to respond because of Depression
League of Nations was unable to initiate an effective boycott of Japan
Stimson Doctrine (1932)
US would not recognize any territorial acquisition done by force
Did not slow Japan’s aggression
US and other nations do not stand up to Japan- this will foreshadow things to come with Hitler--- APPEASEMENT