Great Depression

Great Depression

1. Causes/Affiliations

   • Stock Market Crash of 1929
     • Depression began AFTER the crash, not as a result of it
   • 1920s agricultural deflation
     • Farms had grown huge during WWI to feed the soldiers Expansion led to mechanization that was expensive Farmers went into debt achieving mechanization After WWI, less demand Mechanization has led to over-supply Over-suppy (+) less demand = falling prices (deflation)
   • 1920s Consumption
     • Based on credit and installment buying People unable to pay bills later when they are due
   • Speculation
   • Bad banking practices
     • Bank failures begin in Louisville and spread People demand money, banks have to call in loans and sell assets to give people their money, this freezes credit, frozen credit means less money in circulation, and this leads to deflation In response to deflation, businesses have to cut costs, this means laying off workers/reducing wages/cutting hours, workers that lose jobs can't buy anything, which makes companies cut costs again, banks stop giving loans VICIOUS CYCLE
   • Dust Bowl

2. Life

   • Widespread hardship
     • Bread lines and food drives
   • Massive unemployment
     • 1932 - 24.5%
     • 1933 - 1 out of 3
   • Homelessness
     • Shantytowns "Hoovervilles"

3. Hoover's Response

   • Conservative political philosophy - believed government could buffer some of the worst effects, but, on the whole, should stay out of the economy and public welfare "Prosperity cannot be restored by raids upon the public Treasury" Vetoed

4. Lasting Effects

   • FDR and governmental change
     • Made social welfare a federal government priority Established new roles for the federal government Reoriented national partisan politics
   • WWII (not the New Deal) ended the Great Depression

5. FDR's Response: New Deal

   • Reform, Relief, Recovery
     • Bank Holiday (1933)
       • Emergency Banking Act Bank holiday for the government to investigate stability of banks - if unstable, banks were closed - if stable, banks were supported and protected * Restored the people's confidence in the banking system which was key to economic flow
     • "Alphabet Soup"
       • Series of programs in 1933 and 1935-CCC -PWA -WPA -FDIC -TVA -REA -FERA
     • Took US off gold standard