Increase in spending led to large profits so…

› Wages increased

› Encourages more spending

INSTALLMENT PLAN› Partial payments over a set period of time› Interest charges ranged from 11% to 40%

GREAT!!!› Climbing stock market

› Increase consumer confidence

› Labor stability

Rich got RicherCorporation vs Small

Businesses

Rich families (over $100,000) = .1%Poor fams (<$2500) = 71%

CREDIT SPENDING INCREASE IN PERSONAL DEBT

Mergers led to reduced competition. 200 companies owned 50 % of nation’s

wealth When one company went bankrupt… huge

impact on economy and society 86,000 businesses failed wages were decreased by an average of 60% unemployment rate from 9% to 25% about 15 million jobless

STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck

b/c of all this buying & selling, stock value increased › (Ex: G.E stock $130 $396/share)

Who did they need to attract?› HOW?

Investors only had to pay for 10% of the stock's actual value at time of purchase

If a stock is $100 you can pay $10 now and the rest later when the stock rose

› balance was paid at a later date

High interest rates

Demand payment anytime

If stocks fall then don’t have money to pay back

Stocks go up Borrowers sell

at high price Pay off

› Loan› Interest› + make extra

$$$

The goodThe bad

BUILDS UP! PRODUCTIVITY GOES UP! PROSPERITY AND WEALTH INCREASE

BUT……this doesn’t last

Productivity Problems?› Too much› Overstocked warehouses

Held more goods then consumers were buying.

› Led to Increase in Unemployment

FARMERS: Lower farm prices Farmers unable to pay off debts for land and machinery

FACTORY WORKERS: Bad conditions, wages still not good enough

BLACK TUESDAY, Oct. 29th, 1929 - NYC Stock market crashed, causing a depression that would last until 1942

Loss of confidence Uneven wealth Rising debt Stock speculation Overproduction Hardships of farmers and

factory workers

all tried to sell stock at once and bottom fell out of market = panic selling… (many bankruptcies as banks called in loans)

16.4mill sold vs. the avg 4-8mill

1. Risky Loans Hurt Banks Banks earned profit on interest they earned from loans

Gave loans to high risk businesses who could not pay them back

2. Consumers Borrowing Took loans out of bank and could not pay them back

3. Bank Runs PPL feared banks would run out of $$$ led to Banks Closing

4. Bank Failures Unpaid loans and banks runs Banks Closing.

- Over 5500 failed in a few yrs

5. Savings Wiped Out By 1933 9million savings accounts vanished

6. Cuts in Production Businesses can’t borrow $$$ to produce goods. No $$$ to produce or buy

7. Rise in Unemployment As businesses cut production

- Lay offs increase- Unemployment increases

8. Further cuts in production As unemployment increases, income decreases, consumers spend less, and production decreased more.

Farmers were already feeling the effects› Prices of crops went down› Many farms foreclosed

People could not afford luxuries› Factories shut down› Businesses went out

Banks could not pay out money People could not pay their taxes

› Schools shut down due to lack of funds

Many families became homeless and had to live in shanties

Some families were forced to live in shanty towns› A grouping of

shacks and tents in vacant lots

They were referred to as “Hooverville” because of President Hoover’s lack of help during the depression.

1931-1940

“The Dust Bowl”

Crops turned to dust=No food to be sent out

Homes buried 60% lost their farms Many moved South in state of emergency Dust Bowl the #1 weather

crisis of the 20th century

didn't believe gov't should play an active role in the economy

persuaded bankers/business to follow his policy of VOLUNTARY NON - COERCIVE COOPERATION › Promise to keep wage rates› End of 1931 most got pay cuts

Democrats in Congress passed a high tariff (Hawley-Smoot Tariff) to protect U.S. industry› hoped to stimulate purchasing of U.S.

goods this turned out to be a fatal error... Congress did not understand that the

world had become a GLOBAL ECONOMY

in retaliation other countries passed high tariffs and no foreign markets purchased American goods, so U.S. productivity decreased again

PLAN BACKFIRES

he persuaded Congress to establish the RECONSTRUCTION FINANCE CORPORATION› had power to make emergency loans to

banks

but it was too little too late…

Hoover wouldn't involve himself in any programs where the government directly provides aid to individuals› He didn't want to erode Americans sense of

"RUGGED INDIVIDUALISM"

Hoover was increasingly unpopular, but he continued to try... he persuaded Congress to establish the RECONSTRUCTION FINANCE CORPORATION

had power to make emergency loans to banks

but it was too little too late…

and Hoover wouldn't involve himself in any programs of direct gov'tal aid to individuals -didn't want to erode Americans sense of "RUGGED INDIVIDUALISM"

1932 ELECTION1 out of 4 was unemployed…nat'l income was 50% of what it had been in 1929Repubs. nominated Hoover no hopewinner by a landslide = FRANKLIN DELANO ROOSEVELT (Dem - N.Y. governor)

“This campaign is more than a contest between two men. It is more than a contest between two parties. It is a contest between two philosophies of government.”

- What is this saying about Hoover & FDR?- Their political ideologies?

- How was the federal government’s role going to change?

FDR: Keynesian or "pump priming" economics - Based on beliefs of economist John Maynard Keynes - Money should be invested in people, the working

class- Then, spending would increase with new money in

circulation, then businesses would expand to meet the new demand and hire new workers

Hoover: supply side or "trickle down" economics- Money was to be invested at top, in business- Then, businesses would expand, hire new workers and

in turn, spur on spending and further economic growth

http://www.socialstudieshelp.com/USRA_New_Deal.htm

Painting

Grant WoodAmerican Gothic

Literature

Literature

Of Mice and Men

Literature/Cinema

Margaret Mitchell

Frances PerkinsSec. of Labor

Eleanor Roosevelt

A woman is like a tea bag- you never know how strong she is until she gets in hot water.

Great minds discuss ideas; Average minds discuss events; Small minds discuss people.

No one can make you feel inferior without your consent.

It is not fair to ask of others what you are unwilling to do yourself. I could not at any age be

content to take my place in a corner by the fireside and simply look on.

The The FirstFirst

From his inauguration in March through June 1933 FDR pushedPrograms through Congress to provide relief, create jobs and stimulate the economy

1. ReliefImmediate action to halt economy’s

deterioration

2. Recovery"Pump - Priming" Temporary programs to

restart flow of consumer demand

3. ReformPermanent programs to avoid another

depression & insure citizens against economic disasters

 

Bank Holiday› Closed all banks for inspection› Reopened “safe” banks (some with loans)

Federal Emergency Relief Act (FERA)› Direct loans to people to prevent

foreclosures Civilian Conservation Corps (CCC)

› Jobs building roads, plants trees, soil erosion Civilian Works Administration (CWA)

› Jobs building bridges, causeways, hospitals

Tennessee Valley Authority (TVA)› Jobs building factories & dams (elec. to

farms) Works Progress Administration (WPA)

› Work for artists & build roads, libraries, schl. National Recovery Act (NIRA)

› Priced products, set min. wage, work condit. Agricultural Adjustment Act (AAA)

› Paid to reduce crops, unseeded acres, plow under crops/kill animals

Security & Exchange Commission (SEC)› Watch stock market – no fraud / insider

trading Federal Deposit Insurance Corporation (FDIC)

› Insured all bank accounts to $5,000 National Labor Relations Act / Board (NLRA/B)

› Wagner Act – fair business (no monopolies)

Social Security (SS)› Today’s workers pay for today’s retirees

“Share the Wealth”- Socialist - Guaranteed $5,000 to all- Take millionaire’s $ and

divide- Everyone gets car,

house, radio- “Every man a king”- Shot and killed in 1935

- More economic & political talks on radio than religious

- Supported FDR in 1932- Economic reform =

anti-comm. & anti-capit.- Supported fascism- Anti-semitic (nickname)

- Isolationist- Silenced

StateGov’t toRegulateIntrastateBusiness…

Hurt small business

CongressCan’t

Regulateagr

Changing the Supreme Court…. WHY???

PROS- Unemploy.

decreased- Increased income- Preserved resources- Cushion for

elderly/sick- Supported unions- Ensured bank safety

CONS- National debt

increased- Doubled fed.

Bureaucracy- Didn’t increase

small business activity

Set a precedent that the federal government is

responsible for the economic welfare

of the people

“You have nothing to fear, except

fear itself”

Evaluate the effectiveness of FDR’s NEW DEAL legislation. Look at: impact both short and long term. What should have been done differently? Are there any lessons that Barack Obama should specifically learn from FDR, in your opinion? How has this recession impacted or how will impact you in the long run?