I. The Great DepressionI. The Great Depression

A. Roots of the Great DepressionA. Roots of the Great Depression

1. The Great Depression is caused by 1. The Great Depression is caused by farm and industrial decline, credit and farm and industrial decline, credit and consumer spending problems and the consumer spending problems and the stock market crashstock market crash

B. Farm and Industrial DeclineB. Farm and Industrial Decline

1. Steel, Railroad, textiles and other key industries 1. Steel, Railroad, textiles and other key industries unprofitableunprofitable

2. Mining companies struggle due to new energy 2. Mining companies struggle due to new energy production methodsproduction methods

3. Auto industry declines3. Auto industry declines

4. Lumber companies suffer as housing starts fall4. Lumber companies suffer as housing starts fall

5. War sales cause farmers to over borrow and 5. War sales cause farmers to over borrow and overspendoverspend

6. Orders decline after war6. Orders decline after war 7. Farmers overproduce to compensate which 7. Farmers overproduce to compensate which

backfires due to the law of supply and demandbackfires due to the law of supply and demand 8. Farmers lose 60% of their income and farm support 8. Farmers lose 60% of their income and farm support

bill is vetoed by President Coolidgebill is vetoed by President Coolidge

C. Consumer Spending and C. Consumer Spending and Credit ProblemsCredit Problems

1. Consumer confidence falls and consumers tighten 1. Consumer confidence falls and consumers tighten their purse stringstheir purse strings

2. Wages stagnate and price increases retard spending2. Wages stagnate and price increases retard spending 3. Easy credit encourages unwise spending and the 3. Easy credit encourages unwise spending and the

debt cycledebt cycle 4. Economic decline results in defaults on loans4. Economic decline results in defaults on loans

D. The Stock Market CrashD. The Stock Market Crash 1. Dow Jones Industrial Average (30 representative 1. Dow Jones Industrial Average (30 representative

large firms traded on the NYSE) serves as an indicator large firms traded on the NYSE) serves as an indicator on the larger markets healthon the larger markets health

2. DJIA rises almost 400% between 1924 and 19292. DJIA rises almost 400% between 1924 and 1929 3. Rush of new, non-affluent and uneducated investors 3. Rush of new, non-affluent and uneducated investors 4. These people engage in speculation ( betting that a 4. These people engage in speculation ( betting that a

stock would rise without regard to P/E ratios or market stock would rise without regard to P/E ratios or market fundamentals)fundamentals)

5. Many bought “on margin”5. Many bought “on margin” 6. Stocks rise dramatically, followed by widespread profit 6. Stocks rise dramatically, followed by widespread profit

taking and a panicked downslide culminating with “Black taking and a panicked downslide culminating with “Black Tuesday” October 29th, 1929, when stocks lose Tuesday” October 29th, 1929, when stocks lose $30,000,000,000$30,000,000,000

E. Effects of the CrashE. Effects of the Crash

1. Credit markets dry up1. Credit markets dry up 2. World economies, already weakened by U.S. 2. World economies, already weakened by U.S.

protectionist measures, sufferprotectionist measures, suffer 3. People lose their nest eggs and panic by making a 3. People lose their nest eggs and panic by making a

run on the banksrun on the banks 4. Banks can't fulfill obligations and collapse 4. Banks can't fulfill obligations and collapse 5. Unemployment spikes 5. Unemployment spikes 6. Government provides little regulation to avoid 6. Government provides little regulation to avoid

depression or safety net to cope with itdepression or safety net to cope with it

F. The Dust Bowl and MigrationF. The Dust Bowl and Migration

1. Over-farming destroyed topsoil in midwest causing 1. Over-farming destroyed topsoil in midwest causing massive dust stormsmassive dust storms

2. Storms destroy farms and farming communities2. Storms destroy farms and farming communities 3. Desperate residents , known as “Okies” migrate to 3. Desperate residents , known as “Okies” migrate to

California in search of jobsCalifornia in search of jobs 4. Many took to riding trains and the transient lifestyle 4. Many took to riding trains and the transient lifestyle

(Hobos)(Hobos)

G. Hoovervilles and Urban G. Hoovervilles and Urban

MiseryMisery 1. 1. Hoovervilles were shantytowns filled with destitute Hoovervilles were shantytowns filled with destitute

families and single men whose families had been sent families and single men whose families had been sent away.away.

2. Derisively named after President Hoover, whose 2. Derisively named after President Hoover, whose policies many blamed for their financial predicamentpolicies many blamed for their financial predicament

3. Often violent places and breeding grounds for 3. Often violent places and breeding grounds for radicalismradicalism

4. Famous Hooverville set up in New York4. Famous Hooverville set up in New York

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H. The Bonus ArmyH. The Bonus Army1. Veterans of WWI are promised a bonus for their service1. Veterans of WWI are promised a bonus for their service

2. Bonus slated to be paid in 19452. Bonus slated to be paid in 1945

3. Desperate veterans calling themselves the Bonus 3. Desperate veterans calling themselves the Bonus Expeditionary Force (B.E.F.) march on Washington D.C. Expeditionary Force (B.E.F.) march on Washington D.C. demanding an immediate payment (the media give B.E.F. demanding an immediate payment (the media give B.E.F. the moniker of Bonus Army)the moniker of Bonus Army)

4. Violence flares between the B.E.F. and D.C. police4. Violence flares between the B.E.F. and D.C. police

5. President Hoover sends in the Army under Col. 5. President Hoover sends in the Army under Col. Eisenhower and Generals MacArthur and PattonEisenhower and Generals MacArthur and Patton

6. The Army gasses the B.E.F. and destroys their 6. The Army gasses the B.E.F. and destroys their encampmentencampment

7. Three die in attack including an infant7. Three die in attack including an infant

8. People are outraged at this attack on veterans and 8. People are outraged at this attack on veterans and blame President Hooverblame President Hoover

I. Parallels to Our Current I. Parallels to Our Current

Financial CrisisFinancial Crisis A. Easy credit A. Easy credit 1. Credit cards = installment plans1. Credit cards = installment plans 2. Defaults injure creditors2. Defaults injure creditors B. Consumer confidence tanksB. Consumer confidence tanks C. Housing starts fall C. Housing starts fall D. Speculation rampant D. Speculation rampant E. New uneducated investors distort normal financial E. New uneducated investors distort normal financial

trends with irrationally exuberant investing, and blindly trends with irrationally exuberant investing, and blindly panicked divestingpanicked divesting

F. Lack of government oversight leads to abusesF. Lack of government oversight leads to abuses

J. Differences with Our Current J. Differences with Our Current

Financial CrisisFinancial Crisis A. Government mandates or encourages risky lending A. Government mandates or encourages risky lending

and credit default swaps reward itand credit default swaps reward it B. F.D.I.C. protects assets in banksB. F.D.I.C. protects assets in banks C. Government tries to intervene in order to prop up C. Government tries to intervene in order to prop up

financial markets, institutions and economyfinancial markets, institutions and economy D. Global markets not only feel impact, but mitigate it as D. Global markets not only feel impact, but mitigate it as

wellwell E. Energy crises is not manifest in the Great DepressionE. Energy crises is not manifest in the Great Depression

II. The New DealII. The New Deal

A. 1932 ElectionA. 1932 Election

1. N.Y. Gov. Franklin Delano Roosevelt (F.D.R.) soundly 1. N.Y. Gov. Franklin Delano Roosevelt (F.D.R.) soundly defeats President Hooverdefeats President Hoover

2. Promises New Deal to end the Great Depression2. Promises New Deal to end the Great Depression

B. The First Hundred DaysB. The First Hundred Days

1. President Roosevelt creates a number of new 1. President Roosevelt creates a number of new programs to bolster the economy, increase employment, programs to bolster the economy, increase employment, and rescue agricultureand rescue agriculture

2. F.D.R. Recognizes labour 2. F.D.R. Recognizes labour 3. Plan helps blunt revolutionary fervor3. Plan helps blunt revolutionary fervor 4. Many still in desperate poverty4. Many still in desperate poverty 5. F.D.R. resoundingly re-elected5. F.D.R. resoundingly re-elected

C. The Second Hundred DaysC. The Second Hundred Days

1. New regulations and programs tackle labour, banking 1. New regulations and programs tackle labour, banking and investment, and housingand investment, and housing

2. F.D.R. passes Social Security Act establishing 2. F.D.R. passes Social Security Act establishing unemployment insurance, help for the disabled and an unemployment insurance, help for the disabled and an old age pension program old age pension program

D. Legacy of the New DealD. Legacy of the New Deal

1. Revolution averted and relief extended to millions1. Revolution averted and relief extended to millions 2. Social Security and unemployment insurance provide 2. Social Security and unemployment insurance provide

government safety net government safety net 3. The Federal Government assumes a role once 3. The Federal Government assumes a role once

assumed to be the province of the States or charityassumed to be the province of the States or charity 4. Potential total economic meltdown prevented and the 4. Potential total economic meltdown prevented and the

effects of the Great Depression mitigated (though it, effects of the Great Depression mitigated (though it, unfortunately, took another world war to completely turn unfortunately, took another world war to completely turn the economy around)the economy around)

5. Labour rights established and regulation works to 5. Labour rights established and regulation works to prevent private sector abuses like those that contributed prevent private sector abuses like those that contributed to the 1929 crashto the 1929 crash

E. Downside of the New DealE. Downside of the New Deal

1. Deficit spending1. Deficit spending 2. Court packing attempt by F.D.R.2. Court packing attempt by F.D.R. 3. Amendment process circumvented 3. Amendment process circumvented

F. Alphabet Soup AgenciesF. Alphabet Soup Agencies

1. F.D.R. created a number of new 1. F.D.R. created a number of new programs which became collectively programs which became collectively known as the alphabet soup agencies known as the alphabet soup agencies because of their acronymsbecause of their acronyms

2. These included C.C.C. or Civilian 2. These included C.C.C. or Civilian Conservation Corps, the N.R.A. or Conservation Corps, the N.R.A. or National Recovery Administration and the National Recovery Administration and the F.D.I.C. or Federal Deposit Insurance F.D.I.C. or Federal Deposit Insurance CorporationCorporation

Alphabet Soup Alphabet Soup

AssignmentAssignment

1. Turn to page 706 in your book1. Turn to page 706 in your book

2. Write down the following acronyms, and 2. Write down the following acronyms, and explain what they are/were and what they explain what they are/were and what they were designed to do:were designed to do:

CCC, FDC, TVA, FDC, NLRB, SSA, HOLC, CCC, FDC, TVA, FDC, NLRB, SSA, HOLC, FERA, FHA, USHA, SEC, AAA, FDIC, REA, FERA, FHA, USHA, SEC, AAA, FDIC, REA,

PWA, NYA, WPAPWA, NYA, WPA

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