Causes of

the Great
Depression
Decaying Infrastructure

Decaying infrastructure
Farming Crisis
Credit and Speculation
Unequal income
The Crash
 Farming Crisis
Farm auction near Elgin, Neb., in 1932. The crowd forced
the auctioneer to accept bids of five cents on all items,
thereby producing $5.35 for a mortgage debt of $449
owed the Elgin State Bank. This was the first of many
"penny auctions" held in Nebraska under the leadership of
the Farm Holiday Association.
 Before 1920s:
Technological advances in
farming allowed farmers to 1920S
produce more food.
FARM CRISIS
This was great during WWI
to feed our population,
troops and Allied soldiers.
During WWI many farmers
had to borrow money from
banks to buy new land,
tractors, farm houses, etc.
There was a decrease in
demand of American
food after WWI.
Led to surplus of food.
Farmers then received
lower prices for their
crops.
Farming industry
experienced serious
recession throughout
1920ssign of trouble?
Credit and
Speculation
Income Distribution
Presidential
Election
of 1928
Three Ps were major issues in election
of 1928.
1. P for Prosperity: Economic success of
1920s led by Republican Presidents
(Harding and Coolidge.)
2. P for Prohibition: Major issue in U.S.
throughout 1920s and in election of
1928 (wet vs. dry)
3. P for Protestantism: Catholic vs.
Protestant in 1928.
 1920S
STOCK MARKET

Throughout 1920s, people bought

items (electric appliances, radios,
cars) using installment plans.
Companies prospered and people
accumulated debt.
Stock Market: system of buying
and selling shares in a company.
By 1929, nearly 4 million
Americans (3% of population)
owned stock in various
companies.
1920s stock market was a Bull
Market: period of rapidly rising
stock prices.
 STOCK
MARKET

Speculating: invest in
stocks in the hope of
gain but the risk of loss.
Stock price is dependent
on its business model,
customer base, the
industry its in, the
economy, etc.
High stock prices of late
1920s motivated more
people to invest.
 1920S STOCK MARKET
Many people bought
stock on margin (10-20%
down payment, monthly
payments to stock broker
+ interest)
If price of stock fell below
loan amount, stockbroker
could issue a margin call:
demand investor repay
loan immediately.
Investors were sensitive
to a drop in stock prices
and would sell, even if
the stock was worth
less than what they
paid for it.
Many companies and
banks invested also!!!
 The Great Crash
By late 1929: Stock Market running
out of new investors.
Many investors began selling some
of their shares and priced dropped
(Supply of stocks to sell was
greater than demand to buy
them.)
As days went on, more investors did
the same and prices dropped more.
October 24th: Black Thursday:
Market significantly dipped; many
brokers issued Margin Calls.
12,894,650 shares were traded at
significantly lower prices than they
were purchased for.
October 29- Black Tuesday
Stock market crashes-16 million
shares were sold @ far less
value than purchased- The
Great Crash: $30 Billion was lost.
 Banks Collapse Causes of the
for 4 reasons.
1. Loaned money to
Depression
stock investors who
will default on loans.
2. Invested customers
money in stocks.
3. Not repaid on other
loans.
4. Because of rumored
bank failures or
other losses, people
tried to withdraw
money: Bank Runs.
By 1931- 1,700
banks closed.
 Other Causes of the Depression
OVERPRODUCTION OF GOODS
LEADS TO BUSINESS STRUGGLES
By late 1920s, most people had
everything they wanted or could
afford.
Lower consumption meant less
production which led to employee
layoffs.
By 1933, about 25% of Americans
were unemployed.
 Hoover
Responds
 Hoovers Response

Hawley-Smoot Tarif
Gave public speeches about optimism.
Lowered taxes
Public Works Projects: Government financed building
projects.
Helped some but are expensive.
Cant raise taxes during depression or borrow money
from banks- both would hurt private sector.
Hoover asked wealthy to donate to charities.
Created the Reconstruction Finance Corporation
(RFC) Government loans money to banks & businesses
($238 million)
Mainly, Hoover believed in state and city relief (money
directly to poor) instead of from federal government.
 Other Causes of the Great Depression

Tariffs
June, 1930: Hawley-Smoot
Tariff
Led to a decrease in
international trade.
European countries then
enforced their own tariffs on
U.S. products.
 In an Angry Mood

Hunger Marches: Organized by American Communist Party

to take advantage of struggles to change government.
Dec., 1932: 1,200 gathered in D.C. chanting feed the
hungry, tax the rich.
Farmers Revolt: Many farmers began destroying their
crops to raise prices by reducing supply.
 Bonus Army
- 1924: Congress promises veterans of WWI a
$1,000 bonus paid in 1945.
- Veterans protested in 1931 saying they need
early payment.
- Congress passed a bill to provide early payment
but Hoover vetoed.
- The Bonus Army marched on Washington to
protest (20,000.)
Franklin D. Roosevelt Takes
Office
 Roosevelts Rise to Power
1932-Democrat NY Gov. Franklin Delano
Roosevelt in the 1932 election.
Policies for ending the Depression known as the
New Deal.
He was very confident he could make things better;
sharp contrast to Hoover failure to do anything
effective.
FDR defeated Hoover by roughly 7 million votes,
with the electoral total being 472-59.
FDR dominates the election
(472-59)
 Roosevelts Rise to Power
1910- NY state Senator
(Progressive)
Sec. of Navy under W.
Wilson through WWI
1920- V.P. candidate in
Presidential election
(for James Cox who was
defeated by Harding)
Soon after came down
with polio, a paralyzing
disease.
 Roosevelts Rise to Power
1928: Progressive Governor of NY.
Provided government aid ($25 million) to New Yorkers during
early years of Great Depression.
Used government's money and authority to help the needy and
became very popular in New York.
Many approved of him using government authority to help the
needy.
Many also believed his struggle with polio gave him a better
understanding of hardships people faced.
He wins Presidency in November, 1932.
But not inaugurated until March, 1933.
Unemployment continued to rise all winter and bank runs
continued.
By March, 1933: over 4,000 banks have collapsed over 9
million savings accounts.)
 The 3 Rs:
1. Relief: immediate action taken
to halt economic depression. The New Deal
2. Recovery: Temporary programs
to restart the flow of consumer
demand.
3. Reform: Permanent programs to
avoid another depression and
insure citizens against economic
disasters.
The First 100 Days: March-
June, 1933
Congress passes several major
laws to combat the Depression.
This is the First New Deal.
 The first 100 days

1. Bank holiday
banks shut
down 4 days
2. 21st
Amendment
3. NRA; National
Recovery
Administration
 The First Hundred Days Begin

FDR promised a New Deal.

Government needed to asisit with the hardships of the
Depression.
During his first hundred days (March 9-June 16,1933) in
office, FDR proposed and Congress passed 15 bills, known as the
First New Deal.
These 15 bills had three goals in mind: to offer relief, recovery,
and reform to the American people.
FDR and his Progressive advisers strongly favored government
intervention in the economy.
 The First Hundred Days Begin
Immediately, Roosevelt dealt with the banking crisis
by convincing Congress to pass the Emergency
Banking Relief Act (government makes sure
banks still standing are sound.)
He became famous for his fireside chats in which
he communicated to the American people on the
radio letting them know what he was trying to
accomplish.
Congress passed a number of laws and FDR created
many agencies that were designed to provide
assistance and restore confidence in the economy.
Those agencies are:
 Civilian Conservation Corps
The CCC was one of the most successful programs of
FDRs New Deal.
Enacted during the first days of the Roosevelt
administration, the Civilian Conservation Corps mobilized
over three million young, unmarried, unemployed
Americans (17-28) for nine years across the nation.
The CCC was designed to provide employment for young
men in relief families who had difficulty finding jobs
during theGreat Depressionwhile implementing a
general natural resource conservation program in every
state and territory.
Of their pay of $30 a month, $25 went to their parents.

Opponents hated the increased involvement of the

government in the economy while supporters praised its
efforts.
 1st New DealWicked Expensive
But did it Work???
CivilianConservation Corps
Tennessee Valley Authority
Agricultural Adjustment Act
Federal Emergency Relief

Administration
National Recovery Administration
Federal Deposit Insurance Corporation
Public Works Administration
Securities and Exchange Commission
1. WPA; Works Progress Administration
Created public works projects (bridges,
roads, parks, etc)

2. AAA; Agricultural Adjustment

Administration paid farmers $ to grow
fewer crops!

3. FDIC; Federal Deposit Insurance

Corporation
4. CCC; Civilian Conservation Corps young
men from 18 to mid 20s join this; work in the
wilderness, send money back home

5. TVA; Tennessee Valley Authority provided

dams & electricity to farmers in the
Tennessee Valley area
 2nd New Deal
WPA: Works Progress Administration- $11

billion to employ 8.5 million workers to

build roads, highways, streets, buildings,
airports, parks.
Social Security Act: (Aug.1935) Monthly

retirement benefit.
Workers receive benefits @ 65 years old by

paying premiums throughout employment.

Also supplied temporary income to

unemployed looking for jobs.

 FDRs Second Term
Court Packing:
The Supreme Court (9 mostly Republican justices)
opposed many of FDRs proposals and agencies,
claiming them unconstitutional.
FDR sends Congress a bill: if any justice had served
10 years and did not retire within 6 months after
reaching the age of 70, the president could appoint
another justice to the Court.
Court Packing plan was a political mistake as it
threatened the separation of powers.
It was unsuccessful and was a rare mistake by FDR.
Last New Deal Reforms

The National Housing Act: Govt

loans $500 million to builders willing to
buy blocks of slums to build cheap
housing.
The Farm Security Administration:
$1 billion loans over four years to
farmers.
The Fair Labor Standards Act:
ended child labor, established 40 hour
workweek, protection for workers.
 Challenges to the New Deal
Two years into FDRs first term and only slight
economic improvement.
Still 10 million unemployed.

Criticism from the Right:

Changes were radical and gave government too

much power.
Government told businesses how to operate
(controlled prices, wages, etc.)
Spent too much money (deficit spending)

New Deal threatened capitalism and individual

freedom of businesses.
Business leaders and anti-New Deal critics formed
the American Liberty League in 1934.
AFRICAN AMERICANS
Federal relief programs in the South
reinforced racial segregation
Not offered jobs at a professional level
Received lower pay for the same work as
white workers
Social Security Act excluded farmers and
domestic workers- nearly 2/3rds of
working African Americans
Still had the highest unemployment
rates
Boycotted and protested
An increase in lynching no relief from
federal government
 The New Deal did not end the Depression
Economy collapsed again in 1937
Americans had less money because FDR had
cut back on government spending while
increasing taxes
Social Security tax was partly to blame
The tax came directly from workers paychecks so
Americans had less money to spend
 National Debt the total amount of money the
government has borrowed and has yet to pay
back
The government borrows when its revenue does
not keep up with its expenses
To fund the New Deal, the government had to
borrow massive amounts of money
National debt rose from $21 billion in 1933
to $43 billion by 1940
 Legacy of the New Deal

The New Deal did not end the Great Depression

and was only slightly successful in assisting as
unemployment was high until WWII.
However, the New Deal did give Americans a
new sense of security.
People all across the country, from farmers to
businessmen to homeowners now looked to
government to protect them.
Finally, the New Deal brought about a new
attitude towards government, as FDRs
programs created a safety net (safeguards and
relief programs) against economic disaster.