History Lecture 3 12 15 Great Depression and New Deal I Factors in the Crash A Global Economy post WWI Key Term Overproduction and under consumption Bonus March Alphabet Agencies Dust Bowl 1 U S wants to help out Europe but we don t have a good enough economy to help 1 United States begins to produce more goods than ever before under the assumption them 2 We spent all of our money on the war B Overproduction and Under Consumption that Europe will buy it 2 Europe has no money to buy the extra chairs 3 United States is losing money C Layoffs and Declining Wages 1 Continued overproduction 2 3 Downward spiral of spending Laid off workers cannot purchase chairs either D Speculation on the Stock Market 1 Buying on the margin a Banks offer short term loans 1 Come with high interest rates 2 People take loans and invest in stock market a Works well if stock market goes up 3 By mid 1929 people notice that stock market is dropping E Black Tuesday October 29 1929 1 Stock market crashes a Everyone takes out their stocks 2 Over 16 million shares of stock were sold a Monetary value was 14 billion II Early Responses A Herbert Hoover and Old School Capitalism 1 Capitalism says that markets essentially work on supply and demand a People pay for what they need b Less stuff higher demand vice versa 2 Sometimes things will be up and down 3 Herbert Hoover just wants to ride it out a By 1932 most corporations have not recovered b U S Steel has laid off 10 1 Once U S Steel laid off workers others laid off workers as well c Unemployment Rate was 25 not including non industrial workers B Reconstruction Finance Corporation 1932 1 Working with congress Hoover arranges for 10 million in government money 2 Railroads banks and insurance companies were hit the hardest III FDR and A New Deal A Reforms Banks and Financial Practices a 10 million will go toward making jobs in these fields 3 Bonus March 1932 a WWI veterans were having an extra hard time with the depression 1 Came back with medical disabilities 2 First ones to be laid off b Bonus Act 1925 1 Guarantees veterans 1 500 in 1940 c Veterans congregate in Washington D C and march through the streets 1 Police gas WWI veterans 1 March 1933 FDR targets system that tore down he economy a Orders every bank in the country to shut down for one week 2 In that week he goes to congress to make laws that have to do with changing banks and financial practices a SEC Securities and Exchange Commission 1 Government agency designed to regulate the stock market b FDIC Federal Deposit Insurance Corporation 1 In 1933 every deposit account where banks are signed up with the FDIC up to 100 000 is insured a 250 000 today as of 2009 c Glass Steagall 1933 mid to late 90s 1 Separates banks into Commercial and Investment Banks 2 Commercial Banks a Deal with average banking giving loans to small business owners 3 Investment Banks a High risk loans 3 FDR reopens banks and millions invest in the banks B Alphabet Agencies 1 Federal agencies designed to give relief and jobs to Americans 2 Civilian Conservation Corps CCC 3 WPA Works Progress Administration 1936 1943 a Infrastructure 1 80 000 bridges were built in 8 years 2 Invested in schools for better education a 6 000 schools were built b 9 300 gyms and auditoriums c 1 000 libraries d 2 300 stadiums 3 If you build them today they are lasting investments 4 8 million people gained jobs b Arts C Dust Bowl and Farms 1 Corn Wheat and Cotton are the most profitable crops a Make the most pollen and dust 2 After decades soil is bad 3 Worst recorded drought in history a No water for plants no water for soil 4 Wind comes down and blows dust for hundreds of miles 1 Unemployment benefits for those who have lost their jobs 2 Old Age Pensions 3 Financial assistance to those with disabilities 4 Widows with children are given financial assistance D Social Security E Fair Labor Standards Act 1938 1 Federal Minimum Wage enacted a 25 cents hour 2 40 hour week Overtime 3 Outlawed Child Labor under 16 IV What ends the Depression A New Deal helps but it can t fix all of the effects of the economy B War