HIST 2112 1ST Edition Lecture 14 Outline of Last Lecture I.Warren G. Harding II.A. Mitchell PalmerIII. 18th Amendment (Prohibition 1919)IV. EvangelismV. 1925, Scopes TrialVI. Henry FordVII.FilmVIII.RadioIX.Teapot DomeX. Coolidge, “Back to Business”XI. Europe’s DownfallXII. US Stock Market BoomsOutline of Current Lecture XIII. American workforce’s productivity outreaches wagesXIV. Margin BuyingXV. 1929, October, Stock Market CrashesXVI. 1929, Herbert Hoover is PresidentXVII. Hoover TriedXVIII. Democrats Regain the White HouseXIX. March 1933, “Hundred Days”Current Lecture10/8/13: New Deal America  American workforce’s productivity outreaches wages- End of 1920s—productivity increases due to machinery- Consumer economy is unhealthyThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Installment plan: Purchasing a commodity over a period of time 60% of cars and 80% of radios had been purchased on a plan; this created outstanding debt- Farm price plummet/no demand- Exports fall because of high tariffs and foreign countries suffering- Decline of auto and construction industry Satiation of demand Ripple effect: causes large contraction in economy Real estate boom levels out, which slows construction Shifts investments from construction to stock marketo Draws capital away from loanso Funneled into stock market  Margin Buying:- Ex. Buyer pays $10 and borrows $75 from the broker, buys RCA 1 share at $85. Buyer sells at $420; $420 – ($10 + $75(5% interest owed to the broker)) = $331.25 return on a $10 investment- A lot of debt at every level Overheated economy Federal reserve is laissez faire (inactive) Banks have overextended 1929, October, Stock Market Crashes:- Stock market was only supported by debt- Economy had slowed- Margins were being recalled- 600 bank failures; by 1933 there were 6,000 bank failures in US- Stagnation in economy- Farmers suffered the most 1929, Herbert Hoover is President:- Success story Raised as an orphan Became an engineer Classic hard-working; though uncharismatic Popular; highly anticipated presidency- HOWEVER, Hoover was devoted to an economic philosophy that the free market would correct itself- Blamed for depression Newspapers were nicknamed “hoover blankets”- But policies that set the stage for the Great Depression were before Hoover’s time Hoover Tried:- 1929, Agricultural Marketing Act $1-2 billion to purchase crop An attempt to stop the downward spiral of crop prices by seeking to buy, sell and store agricultural surpluses or by generously lending money to farm organizations However, money was exhausted and farmers losses continued to increase- 1932, Reconstruction Finance Corporation An independent agency of the United States government, established and chartered by the US Congress To provide financial aid to railroads, financial institutions, and business corporations The RFC made little use of its powers under the Herbert Hoover administration Ineffective because the US was hoarding money, instead of creating businesses and such- 1930, Hawley-Smoot Tariff Congress proposed to increase rates Highest protective level; increases problems The act brought retaliatory tariff acts from foreign countries, U.S. foreign trade suffered a sharp decline, and the depression intensified- 1932, Bonus Army Aggregation of WWI veterans in Washington D.C. who called themselves the “Bonus Army” US promised them a cash bonus—that wouldn’t be paid until 1945 When the Great Depression happened millions of Americans were hungry and homeless—the veterans needed relief The group of veterans went to Washington to lobby Congress for a billproviding veterans pensions Army Chief of Staff MacArthur was convinced that the march was a communist conspiracy to undermine the government of the US MacArthur convinced Hoover to OK a raid on the encamped veterans and used force, which further sealed Hoover’s reputation of uncaring Strengthens case for Democrats Democrats Regain the White House:- Hoover was ill-suited for leading US during crisis- FDR, or Franklin Delano Roosevelt, (cousin of Theodore Roosevelt) is elected- Campaign theme song: “Happy Days Are Here Again”- FDR’s strategy  restore confidence in people- People needed to lose fear to provide economic stimulus Americans didn’t trust banks: during depression they withdrew all their money from the banks- People listened and he developed fireside chat to talk to people through radio  March 1933, “Hundred Days”:- First 100 days of FDR administration was named “Hundred Days”- It was a unique presidential beginning: lots of legislative action in first 100 days- Declares “Bank Holiday” FDR implements “Bank Holiday” in order to push Emergency Banking Relief Act through Congress, which closes banks until soundness can be established Many people lost life savings, but it saved more from losing life savings if it hadn’t had been implemented- Banking Act of 1933 Establishes Federal deposit Insurance Corporation—FDIC Insures deposits up to $5,000 Safety nets under banks for people “Restored” commercial banking to the purposes envisioned by the Federal Reserve Act of 1913 A central cause for a period of stability in the US banking system- Civilian Conservation Corps (CCC) Hires young men to work on conservation projects: parks, highways, trails These were social contribution jobs to young men, in hopes that they would spend money to help the economy However, the men sent the money home to parents because of the widespread fear of losing money- Abandoned Gold Standard, forbade hoarding Domestically the economy was being ruined by deflation Prices were falling to an extent that it was bankrupting farmers and manufacturers Taking America off the gold standard gave the Federal Reserve the ability to reflate the currency and stop further price declines Internationally, the dollar was becoming very expensive compared to currencies that that were no longer based on gold; this in turn made American products very expensive, which caused the collapse of export shipments, forcing companies to lay off workers and close plants FDR wanted to avoid past