Post on 14-Jan-2015
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The Ripple Effect
At first, crash only affected those heavily invested in stock market
It did not take long for a ripple effect to occur
How the Crash Spread
Risky loans hurt banksBank loans to high-risk businessesBusinesses unable to pay loans when
stocks fell
Consumer borrowingConsumers heavily borrowed to purchase
goodsConsumers unable to pay when banks
called in loans
How the Crash Spread (cont.) Bank runs
People feared banks would run out of money
Result ran to banks to withdraw Banks had to recall loans from borrowersBanks could not get money fast enough
Bank failuresUnpaid loans + bank runs = bank failuresThousands of banks closed
How the Crash Spread (cont.) Savings wiped out
Bank failures wiped out people’s savingsBy 1933, money from over 9 million
accounts had disappeared
Cuts in productionBusinesses could no longer borrow $$ to
produce goodsPeople had no $$ to buy goods anyway
How the Crash Spread (cont.) Rise in unemployment
Because businesses had to cut production, they laid off workers
By 1932, over 12 million unemployed Further cuts in production
Unemployment +Shrinking economy = Less output of goods
Impact on World
International banking, manufacturing and trade made the world internationally dependent upon the US
US demanded France & Britain pay wartime debts while keeping taxes on imports high
Created a situation in which the Allies had to rely on Germany’s reparations
Underlying Causes of the Great Depression Stock market crash did not cause the GD
Main Causes:Unstable EconomyOverspeculationGovernment Policies
Unstable Economy
Uneven distribution of wealth
Increase in supply, decrease in demand
Farmers & workers did not profit from boom
This all added to make it increasingly difficult for the economy to quickly recover
Overspeculation
Too much stock bought on margin
Therefore, the stock market boom was based on borrowed money not real value
Government Policies
Federal Reserve cut interest rates to stimulate economy
1929 – worried about overspeculation limited US money supply (discourage lending)
Result = not enough $$ to help economy recover from crash
Poverty Spreads
GD had serious social effects
Not long until it hit all levels of society
Laid off (even white collar)
Savings disappeared (literally)
“Hoovervilles”
Hardest hit = lower class
Many became homeless
Homeless built shanty towns out of cardboard or scrap materials
Why “Hoovervilles?”
Hooverville Children
Many blamed President Hoover for not helping
Hooverville
A woman describes a Hooverville in Oklahoma:
“Here were all these people living in old, rusted-out car bodies,” she noted. “There were people living in shacks made of orange crates. One family with a whole lot of kids were living in a piano box.”
Drifters & Hobos
Many homeless, jobless people became drifters or hobos
Hitchhiked throughout US Many hitched rides and slept in open
boxcars or freight cars
Farm Distress
Low crop prices = low income for farmers
Many could not pay mortgage lost farms
Things got worse in Midwest as the nation was hit with a terrible drought
The Dust Bowl
Name given to the central and southern Great Plains in the 1930s when the region sustained a period of drought and dust storms.
“Black Blizzard”
Surviving the Great Depression
Americans pulled together
Support for one another & protests led to much needed change
Change in America
1933 – 21st Amendment Prohibition is repealedSeen as a failed social
experiment
Changes in America (cont.) Empire State Building
102 stories – 1,250 ft. tall
Employed thousandsCosts $41 million (half
of est. costs)Bragging rights for US
End of an Era (1920s) Al Capone
Arrested
Calvin CoolidgeDied
Charles LindberghSon kidnapped &
murdered
Babe RuthRetired
The Election of 1932
Herbert Hoover (R)“Brother Can You Spare a Dime?”
Franklin Delano Roosevelt (D) “Happy Days Are Here Again!”
Who would you vote for????
Hoover vs. FDR
Hoover’s Policies Agricultural policies
ultimately failed Mid-term elections –
Dems gained control of Congress
Tried to create jobs by spending more on:BuildingsRoadsParksDams (incl. Hoover Dam)
Hawley-Smoot Tariff (1930) Highest import tax in history Attempt to protect domestic industries
from foreign imports Backfired b/c Europe raised their tariffs,
thus leading to slowdown in international trade
RFC (1932)
Reconstruction Financing Corporation Gave gov’t credit to many industries,
railroads and insurance companies Lent money to banks Hope = money at top would work its way
down and help economy as a whole How did people at the bottom view it?
RFC (cont.)
People saw the RFC as the gov’t helping banks & big business while ordinary people were starving.
As a result, Hoover’s popularity took a nose dive
The Roosevelts
Franklin Delano Roosevelt (D) & Eleanor Roosevelt
Distant cousins (yes, I know that’s nasty)
6 children
Eleanor Roosevelt
Niece of Teddy “Ugly Duckling” Educated in England
& France Intelligent, warm –
well liked very involved in
several causes/ reform movements
The Election of 1932
Despite a wealthy upbringing, Roosevelt had extreme compassion for those less fortunate
Why do you think this appealed to America?
1932 Election (cont.)
Symbol of optimism and hope
FDR won by landslide Served most consecutive
terms as president (4) until his death in 1945
1933 Inaugural Address
“The only thing we have to fear, is fear itself…”
The First 100 Days
Immediate relief = goal March 9 - June 16, 1933 a record
number of bills sent, all of which passed easily
Emergency Banking BillMarch 12 - FDR announced soundest banks
would reopen. March 13 - deposits at those banks
exceeded withdrawals
First 100 Days (cont.)
"Capitalism was saved in eight days," said Raymond Moley
This was critical b/c it demonstrated to Congress that the New Deal was the real deal
First 100 Days (cont.)
Other bills included the creation of the: Federal Emergency Relief Administration Civilian Conservation CorpsReconstruction Finance CorporationTennessee Valley Authority
First 100 Days (cont.)
Congress also:gave the Federal Trade Commission broad
new regulatory powersprovided mortgage relief to millions of
farmers and homeowners.