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Unit 3 Lesson 2
the Period
Between the Wars
Double Catastrophes of the 1930s
(the party is over)
Great Depression
11.6 Students Analyze the different explanations
for the Great Depression and how the New Deal
fundamentally changed the role fo the federal
government.
Table of Contents
1. Causes of GD
a. Failure of Dawes
Plan
b. uneven distribution
of wealth
c. credit problem
d. the stock market
crash
i.
speculation
2. Fall Out
a. A perfect storm
b. Tariffs
3. Keynesian Economics
4. Effects of GD
5. The Dust Bowl
6. Hoover
a. failed response
b. Hoovervilles
c. RFC
d. trickle down
economics
e. Bonus Army
What you will learn:
Uneven wealth
farmers and unskilled workers lost money
Overproduction caused lost jobs
The Federal Reserve increases rates
Tried to slow stocks but failed
During the summer of 1929 production
decreased
Black Thursday – stocks crash in 1929
I. Global Depression
Dawes Plan Failed
Overall US production
plummets
Allies cannot pay
debts to United
States
U.S. investors have
little or no money to
invest
Europeans cannot
afford American
goods
U.S. investments in
Germany decline
German war
payments fall off
II. Unevenly distributed
Wealth
Rich became richer
Worker annual income:
$2000 a YEAR
RICH: $100,000
1% of the population controlled most of the
wealth in America
The wealthy did not buy enough to keep the
economy booming
Overproduction and
underconsumption
The Down Turn Begins
Stock market gambling included
Americans borrowed heavily to bet on
stocks
businesses put their cash into margins
loans rather than into new machines and
factories
the connection between the real value of
companies and their stock prices was
reduced
Credit Problem
People used credit
Installment plans
By end of 20s 80% of radios and 60% of
cars bought on credit
Problem: America was living beyond its
means
The Economy is in
Trouble
Signs that the economy might be
weakening or be in trouble in the 1920s
rural bank failures
wealth was unevenly distributed
United States imports declined by the end of
the decade
Stock Market Crash
Confidence in Market important
Speculation
Investors gambled with money they did not have,
stocks increased and a profit was made
Stock Market began to fall
Fall became a free fall by end of Oct. 1929
Confidence in market over
More Troubles Brewing
Stock prices grossly inflated
Buying on margin
Too much borrowing from banks
Do not have real value
Buying stocks on margin contributed to
the Great Crash
as prices fell, stockholders either had to
sell their stocks or pay more cash
Stock Market Crashes
The Stock Market “crash” refers to
the huge drop in the value of stocks
Basic Cause of the Depression
overproduction of consumer goods
October 29, 1929
GE stock went from $400 to $283
People pulled money out of the stock
market
Billions of dollars were lost
Economy contracted
What caused the Stock Market to crash?
Could have it been prevented?
Fall out
Banks Collapse
People took their money out of the bank
1929 641 banks failed
1930 1350
Why were there so many bank failures?
Effects of the Great
Crash
Investors and business lose millions
Thousands of banks fail
Savings are wiped out
Business production cut
Lay off thousands of workers
Unemployment rises
Consumer spending further drops
The Great Depression sets in
A Perfect Storm
Federal Reserve cut interest rates in the 1920s
to stimulate growth (sound familiar?)
By 1929 the FR limited money in circulation to
stop lending
So then there was not enough money in
circulation after the Crash
Result: investors went to banks that did not
have enough cold hard cash to take out their
money
Spiraling out of control
Not enough money + Not enough buyers
+Not confidence = business fails
Businesses respond by:
Cutting pay roll, lay offs, cutting production,
Closing doors
1933 25% of Americans were out of jobs
Presidential Lack of
Action
President Hoover opposed direct government
relief for individuals
the character of the American people would be
damaged
Hoover’s way of dealing with the depression
tax cuts
higher tariffs
a limited program of public works
In the 1930s duties were boosted on a thousand
items by the
Hawley-Smoot Tariff Act
Hoover Tries
Reconstruction Finance Corporation helped
large corporations
banks
insurance companies
Did not help
Farmers
People in need
Poor homeless people built shantytowns called
Hoovervilles (Play song)
Tariffs
June 1930 Congress passed Hawley-Smoot
Tariff
Raised prices on foreign imports
foreign goods could not compete in U.S.
Europe passed their own tariffs
Tariff added to problems
We had too much stuff and now could not sell it
to Europe!!!
H-S Tariff destroyed international trade
Keynesian Economics
John Maynard Keynes
What caused Great Depression:
Gov’t did not have proactive polices
1932
The Bonus Army
a march on Washington was made by a group of
unemployed WWI veterans
Presidential election
Republican platform
letting the nation’s problems be solved by natural forces
Democratic platform
the repeal of Prohibition and fairer distribution of the
products of industry
Keynes Analysis of the
Causes of the GD
1.
2.
3.
4.
Short money supply
Uneven distribution of wealth
Stock speculation
Consumer spending, productivity and
employment
IV. Effects of the
Depression
millions of unemployed
people
malnutrition in children
fewer marriages
More Effects
Women and African Americans
often lost their jobs to white men
Heavily discriminated
Scottsboro Case
the justice system ignored the civil rights
of African Americans
Yet Even More Effects
Farmers economic problems
falling demand and rising supply of crops
The poverty of the depression exists amid
the plenty of the rich country
FDR Wins 1932 election
People did not like Hoover
Wanted to do whatever possible to try
to end the Depression
Had a political history of establishing a
relief program
The Dust Bowl
11.6.3 Discuss the human toll of the Depression, natural
disasters, and unwise agricultural practices and their
effects on the depopulation of rural regions and on political
movements of the left and right, with particular attention to
the Dust Bowl refugees and their social and economic
impacts in California.
V. Dust Bowl
Causes
dry-farming techniques
drought
wind
Migrants headed to
California
Agriculture
One fourth of American work force
WWI – increase crop demands
Did not adjust for post war consumption
Crop prices fell
Ogallala aquifer – put a straw in it
Dust Bowl – top layer of soil gone
Lots of dust
Farming Techniques
Heavy farming
Ruined the top soil
Removed natural grassed that kept soil
down
Disaster
Heavy winds
Loose soil
Dust Bowl
1932- Great Plains
Began in Tx, Ok, Ks, NM and Co
Storms killed cattle and birds
Seeped into houses and covered
everything
1930 – 1934 – one million farmers lost
their farms
Banks sold farms at auction
Some became tenant farmers on their
own land
Migration
Ecological and Economic Disaster
caused people to move
Dust Bowl refugees: Okies
Moved west to CA, OR and WA
800,000 moved out of Ar, Ok, Tx
Millions left the midwest
Rural states depopulated
Large cities gained people
Affect on families
“breadwinners”
Shame as a man
Desertion of families
Guilt
Felt bad if doing better than suffering friends and
fam.
Reduced birthrates, lowest in U.S. history
Making something out of nothing
Kids quit school
Broken families
Hoover and Volunteerism
Hoover product of his times: laissez faire
Hoover’s policy: do nothing
Hoover asked businesses to:
Keep wages, prices up and unemployment
down
Governments: reduce taxes, interest rates
and create public works
Richer people to donate to charities
Encourage consumption and production
Hoover Fails
Good ideas, but relied on volunteer
cooperation
“pull yourself up by your bootstraps”
Faith in localism: local and state
governments could resolve the problems
They did not have the resources
Hoovervilles
Failure linked to
president’s name
Campfire = hoover
heaters
Homeless camps =
hoovervilles
Hoover Policies
Reconstruction Finance Corporation
(RFC) – Hoover tried to get Congress to
create the RFC.
RFC gave billions the railroads and large
business (sound familiar?)
Money given to banks so they could lend
money
Hoover believed that banks could:
Give money to businessmen, businessmen
would hire workers, production goes up and
consumption rises
Known as trickle down economics.
Banks got money, but did not lend it or
increase loans
Businesses did not hire more workers
Money did not “trickle down”
Bonus Army
1932 WWI vets went to D.C. to demand
the bonus Congress promised
Called the Bonus Army
1931 Congress passed the bill, Hoover
vetoed it
20,000 vets occupied the capital
A riot broke out when police tried to evict