Great Depression

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Great Depression New Deal
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Part I. What Caused the Great Depression?

• The stock market crash of 1929 was the event
  that started the Great Depression. The
  depression was caused by several weaknesses in
  the economy.

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Was the Stock Market Crash THE Cause? No.

• The percentage of American households owning
  stock in 1929 was probably less than ten percent.
  Today it's about 50 percent -- largely because of
  retirement plans like 401(k)s.
• ULTIMATELY THE EFFECTS OF THE CRASH WERE IN A LOT
  OF WAYS PSYCHOLOGICAL.
• http//marketplace.publicradio.org/features/crash_
  1929/story_01.html

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The Banking Problem

• The crash took an especially heavy toll on the
  nation's banks. Many had made loans to stock
  market speculators that could never be paid off
  -- and simply ran out of money.
• During the Depression, more than 9,000 banks
  failed nationwide. The stock market crash and
  subsequent bank failures cost ordinary Americans
  billions of dollars -- and left many wondering
  whether their money was safe anywhere.
• http//marketplace.publicradio.org/features/crash_
  1929/story_01.html

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Purchases
Producers
Consumers
Wages (Jobs)
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Primary Causes of the Great Depression
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1. Not Enough Buyers

• 40 of all families lived in povertybefore the
  crash
• The richest 1 owned 59 of the nations wealth.
• The poorest 87 owned only 10 of the nations
  wealth.
• Therefore, demand for many products was low.
• The market for luxury goods was destroyed by the
  crash.

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2. Too Much Debt

• People began buying many goods on credit, often
  more than they could afford
• 80 of all families had no savings
• What happened when people couldnt pay back loans?

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3. Over-speculation in Stocks

• A Get Rich Quick attitude caused many to
  speculate.
• People risked everything by buying on the
  margin.
• When the market collapsed, these investors lost
  everythingbanks collapsed because loans weren't
  repaid

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4. Overproduction Layoffs

• Industries were producing much more than could be
  sold.
• They were forced to lay off workers and lower
  prices.
• The cycle gets worse

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5. Farming Crisis

• Farmers suffered through droughts and low prices.
  
• With low prices, farmers were unable to repay
  their loans or purchase goods.
• More banks collapsed.

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6. Government Mistakes

• The government set low interest rates before the
  crash and raised them afterward.
• Stock market speculation was unregulated.
• Bank deposits were not guaranteed.

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Part 2 The Effects of the Great Depression
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Christmas Day Breadlines in New York City, 1931
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Summary of effects

• Unemployment 25
• Homelessness
• Hunger
• Psychological depression
• More Cooperation

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Part 3 Solutions

• At first, President Hoover favored the
  traditional government approachdo little and
  wait for things to get better.
• Private charities were responsible for helping
  the poor

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Hoovers Attitude

• I do not believe that the power and duty of the
  general government ought to be extended to the
  relief of individual sufferingthough people
  support the government, the government should not
  support the people.
• --Herbert Hoover, 1930

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Discussion why do you think Hoover believed
this?
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Desperate times call for desperate measures

• Hoover himself began to change his views
• Hoover started some huge projects (like the
  Hoover dam)
• Tariffs were raised, but this backfired
• Hoover supported programs to help banks extend
  loans to struggling businesses

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Election of 1932

• By 1932, the American people wanted new
  leadership.
• Democrat Franklin Delano Roosevelt (FDR) easily
  defeated Hoover.
• Roosevelt promised the American people a New Deal.

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FDRs Inaugural address

• The only thing we have
• to fear is fear itself

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Part 4 The New Deal

• The New Deal was FDRs plan to help the nation
  get through the great depression by enacting many
  government programs designed to provide
• Relief
• Recovery
• Reform
• Examples of New Deal programs include

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Federal Emergency Relief Association

• FERA helped fund local relief efforts.
• However, FDR wanted to avoid government
  handouts
• So

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Public Works Programs
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Government jobs helped people get by
But who would pay their salaries?
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FDR endorsed deficit spending

• The government has a deficit when it spends more
  than it collect in taxes. This money is borrowed
  to be paid back in the future.
• When is it appropriate for the government to
  deficit spend?

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Other Programs FDIC

• The Federal Deposit Insurance Corporation
  guaranteed bank depositsthis helped restore
  confidence in banks.

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Wagner Act

• Guaranteed the right of workers to join labor
  unions.

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Social Security Act

• Collects Social Security taxes from all workers.
• Pays government pensions to retired people and
  disabled people

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Results of the New Deal

• Helped people get by, eased suffering
• Provided hope
• It did NOT end the depression (WWII did)
• Tradition of a more active and more expensive
  government

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