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1 Name Date Class Period CHAPTER 9: THE GREAT DEPRESSION BEGINS ( ) I. Roots of the Great Depression A. 1920s Economy 1. Prosperity a) Total economic output had grown over 50% thanks to revolution in : autos, airplanes etc. + construction of roads, buildings, airports b) higher c) Business friendly gov t: Republican dominated, laissez-faire approach, few on businesses and financial institutions 2. Hints of Problems to come a) industry depressed b) Old industry threatened by industry (technology advances) c) easy resulting in high debt d) surpluses mounting in warehouses ( ) e) stock market resulting in over-valued stock prices f) distribution of wealth B. Election of The Candidates a) (R) Former head of the Food Admin in WWI, Sec.of Commerce under Harding and Coolidge b) (D) Gov. of NY; 1 st Catholic to win a major party s presidential nomination 2. Campaign Issues a) Hoover dry, Smith wet b) Hoover = Quaker (Protestant), Smith = Catholic. Some feared Catholic Church would gain influence in US politics c) Economics. The 1920s. Republicans took the credit! d) The Winner? Easy victory for Hoover and the Republicans. 3. Hoover's Philosophy: Rugged Individualism a) "We are challenged with a peace-time choice between the American system of rugged and a European philosophy of diametrically opposed doctrines - Doctrines of paternalism and state socialism" b) Our American experiment in human welfare has yielded a degree of well-being unparalleled in all the world. It has come nearer to the abolition of poverty, to the abolition of fear of want than humanity has ever reached before" C. The Stock Market Crash 1. The Long a) creates optimism and encourages many Americans to invest heavily in stock. Stock prices reach new highs. b) Important Vocabulary: 1. Stock Market: system for buying & selling shares of companies 2. Bull Market: long period of rising stock prices 2. Stock Speculation and Buying on Margin a) Because of the Bull Market, people rushed to buy stocks. Many people were engaging in, buying risky stocks in hopes of a quick profit b) To do so, they were buying on, paying just a small down payment and borrowing the rest. This worked ok until began to c) Problem with buying on margin: there was no way to pay off the loan if the stock price declined sharply

2 d) : Broker could demand investor to repay immediately. Result of this practice? Investors sensitive to any drop in price. Often quickly fearing inability to repay loan. e) Important Vocabulary: 1. Margin: buying a stock by paying only a fraction of the price and borrowing the rest 2. Margin Call: demand by a broker that investors pay back loans made for stocks purchased on margin 3. Speculation: investing money at great risk with the anticipation that prices will rise D. The Great Crash 1. The Stock Market a) Stock prices began to fall in Sept b) Tuesday, Oct. 29, 1929, prices fell sharply and people felt that the market had crashed. 16 million shares were sold off as panic swept the stock exchange c) Within days, the of a large part of the country which had concentrated in vastly inflated stock prices,. d) By mid Nov. 1929, $30 Billion had been lost more than the US spent in WWI 2. The Banking Crisis a) Banks weakened by crash o banks had lent money to o banks had invested depositors $ in the b) Bank crisis contributes to a recession o When stock values collapsed, speculators couldn t repay loans; banks lost o Banks made less loans, less credit now available leads to a c) Crisis of confidence in the banking system o Banks make $ by $ received by depositors & collect on loans. Banks hold on to only small amount of $ to cover day to day biz. Banks collapse because of - when too many people withdraw their $$. o In this era, when a bank collapsed, customers lost their savings o News of bank failures caused panic and more bank runs E. Causes of the Great Depression 1. a key cause of Depression > = a. new increased production capacity of farms and factories b. Americans buy on down-payment + monthly Installments (credit) c. To pay off, some reduced other purchases. Leads to decreased consumption. consumption leads to lower production leads to ripple effect on economy 2. stifled world trade a. protectionist bill - threw up trade barriers across the US/Europe prompted Europeans to worsening crisis for both US & Europe. b. Created dangerous - In 1932, US exports fell to about of what they had been in 1929 hurts US manufacturers & farmers c. Europe in its own economic crisis in Banks in Europe failed. Europe in a cycle of & 3. Lack of on Stock Market and Banking Industry a. Stocks 1) speculation drove up market prices beyond the stocks 2) practice of buying on encouraged more

3 b. Banks 1) loans to speculators 2) depositors money not 4. Gov t Policies & Mistakes by the Federal Reserve (often referred to as simply the FED) regulates the economy by setting interest rates and controlling the money supply a. In the 1920s, the FED kept interest rates this encouraged speculative schemes. Helped cause the Depression in these ways: 1) encouraged to make risky loans 2) led biz leaders to believe economy still - thus, borrowed more $ to expand production a mistake since it led to at a time when sales were falling 3) companies had to to cut costs b. The FED later interest rates, tightening credit (making it hard to get credit) when easier credit was needed c. Gov t maintained a policy of - belief that depressions were a normal part of the 5. Distribution of Wealth a. of Americans earned of nation's income b. Gov t policy reduced taxes on highest income: so they would in stocks or place it in acct (Trickle Down Theory) c. Not enough $$ in the hands of & who would have bought consumer goods and thus kept $ in circulation II. Life During the Depression A. The Depression Worsens 1. How bad does it get? some statistics a. by 1933, over b. by 1932, ~ 30,000 companies c. by 1933, over unemployed of workforce d. average family only $1,600/yr 2. Grows: Americans line up for free food - Soup Kitchens & Bread Lines 3. Grows a. people forced out of home, b. : shantytowns sprung up all over the country. Called this as people blamed Pres. Hoover for the suffering. c. people wandering streets 4. The Dust Bowl: + farming techniques a. farm crisis /decreased demand/debt b. on the Great Plains c. Dust Bowl - no grass/shrubs to hold moisture soil d. Many lost farms some moved to CA B. Escaping the Depression 1. The Movies - Hollywood a. The : Marx Bros; Marlene Dietrich; Greta Garbo b. The : Walt Disney s Snow White and the Seven Dwarves 1937 (first animated film): ); Gone With the Wind 2. Radio a. listened to news, comedy shows, mysteries, westerns: Lone Ranger b. birth of : The Guiding Light a soap opera because shows sponsors were often makers of laundry soap

4 3. Culture during the Depression a. Art: American Gothic b. Literature: John Steinbeck s c. Photography: great picture magazines: Life, Fortune, Time ** Most famous photojournalist of the Depression d. Architecture: Mt. Rushmore; Empire State Bldg; Rockefeller Center e. Board Games: Most popular? III. Hoover Responds A. Focus on Voluntary Efforts & Public Works 1. Organized series of ; brings together heads of banks, RRs & biz, labor, govt urged 2. Increased (govt-financed building projects) a. led to some construction increases - but didn't make up for majority of jobs lost in b. enough jobs could only be created through more B. Hoover was against increased gov t spending. why? Because 2 ways to pay 1. taxes - but taxes hurt consumers & biz 2. deficit spending - but that meant that gov t had to from banks, and then banks would have less $ to for biz expansion or consumer mortgages etc C. Attempts to rescue banks, industries, farms 1. asks to put more $ in circulation refused 2. Created NCC (National Credit Corp) - pool of $ to enable banks to continue $ in their communities 3. Created (RFC) - expanded the government s role in the economy more than any time prior - made loans to Banks, RRs, Ag Institutions - failed to increase its loans enough to meet need - D. Hoover Rejects Direct Gov t Relief for Citizens 1. Why? Thought it was to do so. Relief better left to state and city gov t 2. But by 1932, political support for direct relief growing. Hoover signs the Emergency Relief & Construction Act - $1.5B for & $300m to states for E. Opposition to Hoover Grows 1. Hunger Marches a. some organized by American Party - had right to petition gov t b. feed the hungry tax the rich" 2. Revolt - farmers especially hard hit - had heavily a. had heavily land to pay for seed, feed & equip. b. After WWI,, farmers couldn't make mortgages - 1/20 farmers upon. Some attempt to drive up prices by destroying crops 3. (aka Bonus Marchers) - WWI vets demand their $1000 bonus, not actually due for payment until a. 25,000 vets walked, hitchhiked, or rode the rails to DC b. camped in in DC - starving & desperate men w/ no job, no hope of finding one c. police/ sent to clear vets from city got violent - press coverage Hoover s image tarnished

5 CHAPTER 10: ROOSEVELT & THE NEW DEAL I. FDR takes office A. FDR's Rise to Power election a. (R) v. (D) b. wins as turned voters away from Hoover 2. Franklin D. Roosevelt (FDR) a. reformer as NY Senator b. stricken in 1921 w/ paralyzing disease w/ no cure 3. FDR as Governor of NY a. for farmers; public utility rates b. set up agency in NY in c. grew popular for using power to help people in economic distress d. energy & also made him popular 4. FDR Inaugurated a. before he took office, unemployment, bank runs b. Americans feared FDR would abandon. 1) 1 oz gold = 2) people withdrew $ from banks to convert it to gold before it lost value 3) led to more c. The situation when FDR took office 1) March '33: over 4000 banks collapsed. $ 9 M savings accts wiped out (led to bank - Closing banks before bank runs put them out of biz) 2) unemployment II. The First New Deal A. The Hundred Days Begins 1. March 9-June 16, 1933: 1 st promised American people a " " & promised a special session of Congress to deal w/ economic crisis 2. New Deal = 3Rs:,, a. Relief: Immediate Action aimed to ease of the needy/unemployed/farmers b. Recovery: Designed to help the economy/consumer confidence recover programs to restart flow of consumer c. Reform: Help prevent future economic 3. Congress passed major acts to meet economic crisis a. Sometimes without even reading them b. Approach was "take one method and try it. If it fails, but above all, Try something! c. ALPHABET SOUP OF THE NEW DEAL B. Focus areas of the New Deal 1. Addressing the Bank Crisis a. passed Emergency Banking Relief Act - 1.) Declared bank holiday all banks. 2.) Banks would be to check for solvency. - only those in sound financial health would be allowed to reopen 3.) This would reassure people that open banks could be & keep them from their $$ out of panic 4.) Banks closed for. 5.) Helped to restore public in banking system b. : March 12: began series of talks where FDR explained his policies in simple, friendly way 1.) encourage people to put $$ back in - security 2.) it worked! - people instead of

6 2. New Regulations for stock market and banks ( ) 3. Agricultural Recovery stabilize supply & demand to raise prices ( ) 4. Industrial Recovery control industrial production and prices with industry-created codes of fair competition, gave workers right to unions ( ) 5. Providing Debt Relief primarily refinancing mortgages ( ) 6. Spending & Relief Programs - aimed at reversing low consumption - organized work programs for unemployed. ( ) C. Effects of 1 st New Deal 1. by end of 1 st yr, FDR convinced Congress to pass many new programs, policies - did NOT restore, but did restore & optimism & in the nation D. Challenges to the 1 st New Deal 1. Criticism from (conservatives/republicans): a. increasing (over $30B by '35) b. pro-labor,, dictatorial, c. 1934, organized called FDR a fascist; New Deal destroying Constitution; leading US to bankruptcy & d. no overwhelming support Democrats gain 10 more seats in Congress 2. Criticism from (liberals/democrats) - believed FDR not going - called for shift of wealth from to a. Father Charles Coughlin (" ") - had 40 m audience - criticized FDR on radio program - called for of big biz & - called for more on wealthy b. The Townsend Plan - Dr. Alfred Townsend - supported "old age " plan - $200/mo for all over, but had to it or it - believed plan would increase spending, remove people from labor force, free up - but when pointed out that his plan would country, lost support c. - Gov, Sen from - " " plan to make "every man a king", a $5K homestead, a $2.5K/yr job, college! - how? - take their, give it to needy - in Baton Rouge, 1935 III. The 2 nd New Deal A. Launching the 2 nd New Deal (1935) - 1 st New Deal failed to generate a rapid economic recovery 1. production & consumption rose, but pre-crash level 2. unemployment figure never fell below 3. Dust Bowl in the Plains 4. But FDR had restored, rebuilt optimism & created 5. goal to speed up recovery, provide economic security, ensure in '36 B. Challenges to the 2 nd New Deal 1. Supreme Court's Role a. Supreme Court declares unconstitutional in Schechter v. US (1935) - NIRA codes unconstitutional "sick chicken" case b. Supreme Court dominated by, conservative c. FDR began working on new series of programs to keep voters support 2. Rise of a. Supreme Court also struck down section of law that established labor's right to b. FDR needed vote in 1936 election

7 c. FDR thought unions could help end depression: = = boost to the economy d. NLRB (Wagner Act) - workers can organize unions e. Congress for Industrial Organization (CIO) - organized unions (workers in particular industry, skilled & unskilled) focuses 1 st on & industry f. Sit-Down strikes - GM workers stopped, but refused to leave factory led to founding of 3. (1935) established principle that IV. The New Deal Coalition A. Roosevelt s Second Term 1. Political : Black Americans voting patterns shift from Republican Party (party of ) to Democratic Party (party of ) 2. Core of now includes (still pretty much true now) a. e. new b. farmers ff women c. labor ( ) g. intellectuals d. h. progressives 3. Roosevelt appts and to positions in his Admin. a. Francis Perkins: Sec of Labor 1 st woman post 4. Election of 1936 a. FDR ( ) vs. Landon ( ) b. FDR wins easily over of popular vote 5. Court-Packing Plan a Supreme Court declares AAA unconstitutional other acts likely to follow b. FDR furious that could block wishes of the of people c. FDRs plan: could be added to SC if any had served over yrs & did not retire when age. - would have allowed FDR to appoint as many as more justices d. public reaction? Outrageous! - viewed as a scheme to interfere with Constitutional principles of: e. FDR s reputation tarnished 6. The Roosevelt Recession late 1937 a. after period of steady drops, rose b. FDR adopted ideas of - Keynesian Economics: argues that should heavily during a recession, even if it had to run a, in order to the economy c. spring of 1938: FDR asks Congress for 7. New Deal Legislation slows a. gained seats in 1938 midterm elections b. FDR preoccupied with events in & B. The Legacy of the New Deal 1. Did not end Depression, but did increase and 2. Broker State a. people now looked to gov t to balance competing economic interests to broker btwn diff. interests b. people looked to gov t to their interests 3. Gov ts New Role a. new public attitude: gov t had a duty to maintain a safety net safeguards and programs to protect them from b. safety net = more gov t

8 c. New Deal increased and of US gov t