The Great Depression

• The optimism of the 1920’s concealed problems in the American economic system and attitudes about the role of government in controlling the economy

• The Great Depression had a widespread and severe impact on American life.

• Franklin Roosevelt’s New Deal used government programs to help the nation recover from the Depression.

What was America’s economy like before the Great Depression?

• 1. Many investors buying stocks on credit with a loan from a broker

• 2. Brokers borrowed the money from banks (such an activity is called Speculation)

• 3. Few people thought a continuing drop in stock prices was possible.

What effect did the Great Crash have?

• 1. Those who could not find buyers for their stocks, favored prices in desperation. ($15 million in stock value wiped out)

• 2. Stock market crash turns into panic of 1929 (by Nov. 13, 1929 losses reach $30 billion)

• 3. People were forced to pay brokers with savings, or by selling their valuables.

• 4. The Nation became locked in a downward spiral – The Great Depression.

When did the Great Crash occur?

• October 29, 1929 – Black Tuesday – stock market crashes.– Investors panic– The people who

bought stock on credit with a loan from a broker had to sell their stocks to pay back the money brokers loaned them.

Causes of the Great Depression

• 1. People over speculated on stocks, using borrowed money that they could not repay when stock prices crashed.– SPECULATION-putting

money in a high risk investment with the hope of making a profit

• 2. The Federal Reserve failed to protect the banking system– Federal Reserve –

the central banking system of the U.S.

3. High tariffs discouraged international trade– Tariff - is a tax

imposed on goods when they are moved across a political boundary

Impact on Americans

• 1. A large number of banks and businesses failed

• 2. One – fourth (25%) of workers were without jobs

• 3. Large numbers of people were hungry and homeless– Hoovervilles - shanty

towns built by homeless people during the Great Depression.

• 4. Farmers incomes fell to low levels

– Farmers reacted to low market prices by growing more crops, which dropped prices even further.

– Many lost their farms to banks, (had to foreclose) but some, instead of giving up farms, destroyed them.

– Dust Bowl in Great Plains

Dust Bowl• Poor agricultural practices and years of

sustained drought caused the Dust Bowl. Plains grasslands had been deeply plowed and planted to wheat. During the years when there was adequate rainfall, the land produced bountiful crops. But as the droughts of the early 1930s deepened, the farmers kept plowing and planting and nothing would grow. The ground cover that held the soil in place was gone. The Plains winds whipped across the fields raising billowing clouds of dust to the skies. The skies could darken for days, and even the most well sealed homes could have a thick layer of dust on furniture. In some places the dust would drift like snow, covering farmsteads.

How was the situation going to be fixed?

• 1. Franklin D. Roosevelt was elected President in 1932 and began the New Deal

• 2. New Deal-series of gov’t programs intended to bring the country out of the depression by creating jobs, boosting the economy, and helping people– Roosevelt worked to save the banks first. He

closed them for 4 days and only reopened the strong ones.

– Started the Federal Deposit Insurance Corporation-insured bank deposits

New Deal Programs

• 1. Civilian Conservation Corps-gave jobs to unmarried men 18-25, paid $1/day, and put nearly 3 million men to work

• 2. Tennessee Valley Authority-built 49 dams in 7 states. Controlled flooding, reduced soil erosion, and generated hydroelectric power.

• 3. Agricultural Adjustment Act-paid farmers to reduce their production of crops, dairy products, and hogs.

2nd New Deal Programs

• Social Security – created supplemental pension plan for retired workers over 65, setup unemployment benefits, and gave $ to people with disabilities

• Works Progress Administration – provided $4.8 billion to help the unemployed.

*FDR-increased rights for labor developed under New Deal

Major features of the New Deal

• Social Security

• Federal Work Programs

• Environmental improvement Programs

• Farm Assistance Programs

• WWII will be the key to pulling the U.S. economy out of the Great Depression.