From Boom to Bust The United States in the Great Depression From Boom to Bust 1929 Inaugural Address: I have no fears for the future of our country. It is bright with hope. A chicken in every pot and a car in every garage. Questions to Consider: What kinds of things characterized the economy of the 1920s? Were there signs that America could be headed toward an economic disaster (pre-oct 1929)? Should the Federal Govt. be involved in preventing economic crisis and in trying to fix economic crises when they arise? Form into small groups. Your groups will be assigned one of the following perspectives: Laissez Faire Capitalist Employer/Wall Street Businessperson Progressive Middle Class Professional Pinko Industrial Laborer Conservative Rural Farmer You will be presented with a number of historical circumstances leading up to the Great Depression. Your task will be to respond to the economic situation based upon what you think your historical perspective would do.
Terms to Know: = capitalist philosophy that limits government involvement in the economy, allowing booms and busts to work themselves out dependent upon market supply and demand (typical of Republican Party in 20th C) = political and economic philosophy that believed the government could enact changes to improve society, often through regulating Wall Street and Big Business, as well as improving working and living conditions (typical of Democratic Party in 20th C) = a person who is sympathetic to socialist economic and political beliefs = philosophy that supports traditional American and Christian ideals and morals, including limited government intrusion into personal and business affairs = markets that are characterized by investor confidence and optimism = markets that are trending down due to lack of spending or flagging confidence Now that World War I is over, global industry is back to normal production levels, which means that fewer foreign countries want to buy American goods. Now United States industry has produced a of goods. What will this do to prices and profits? Farmers during WWI experienced a dramatic increase in demand for their crops, and the Federal Govt. and international marketplace offered tremendous incentive for farmers to overproduce crops, even by taking massive loans to pay for additional farm land and tractors. Now that demand has decreased, farmers face economic crisis as they cannot pay their loans and are threatened with.
Banks in the Roaring Twenties offered too much easy credit, both for homes and smaller purchases. Now Americans have the highest personal debt rates in the world. Banks cannot collect on loans and mortgages and now face bankruptcy. With no central bank in the United States, if too many banks close it will dramatically disrupt the economy. When the economy was strong in the early 1920s, massive housing districts were built in the hope that Americans would keep buying them, and the auto industry also overproduced a surplus of automobiles. By the late 1920s, fewer people are buying homes and automobiles, and the market is experiencing a bubble period. Part of the reason for this lack of spending is that there is an unequal distribution of wealth and live at or below poverty level ($2,500 per year). What should be done (if anything) about these problems? With the Bull Market of the Roaring Twenties, is rampant on the market (meaning stocks are not worth as much as buyers and sellers assume). Many investors are also buying stocks, meaning purchasing a stock on credit, hoping that the stock will make a profit and pay for the loan. By 1929, the stock market appears to be entering into a Bear Market period.
Disaster Strikes - Oct 29, 1929 stock market crashes By mid-nov $30 million LOST Loss of savings, unpayable debt for stocks Bank Failure No govt. insurance = loss of all savings Business failure Nation s total output of goods/services cut in half 1929 - unemployment = 1930 - unemployment = (13 million) Disaster Strikes It s 1930, and the United States is in the midst of the worst economic disaster in its history. You are the President, and you have all of the following issues facing you: 25% unemployment National industry cut in half Drought and lack of demand for crops is bankrupting farmers Banks closing, stock market crashing, and no one has confidence in the American economy or credit (no one will invest, won t give loans to the US either) As President, what will you do? Will you do nothing and let the economy fix itself? What plan could you come up with to fix the economy? (Keep in mind that the Government has never intervened in the economy or given out welfare, except during times of total war) Brother, can you spare a dime? Millions = jobless, homeless, penniless (looking for jobs) Suicide rates soar in 1930s
Blame it on Hoover! Hoover s Non-Response, 1929-31 Devotee of Emphasized Public building projects Tax reduction - Lower interest rates on loans May 1931 - Depression hits Europe Social Unrest Angry mobs of farmers Unemployed veterans camp out in Washington, spring 1932 War bonuses ($) Pop-Cultural Expression: Brother Can You Spare a Dime Big Rock Candy Mountain 1932: Choose your candidate! Fun Facts About Herbert Hoover: Republican He was the first President born west of the Mississippi He became an orphan at age nine (and along with Andrew Jackson is one of only two Presidents who were orphans) He was a member the inaugural graduating class at Stanford University He was the head of the Food Administration during World War I, which was responsible for feeding millions of Americans (and later Europeans) before and after the war His first elected office in the government was President of the United States He was nominated five times for the Nobel Peace Prize 1932: Choose your candidate! Hoover s Views: Hoover was a proponent of Laissez-Faire economics (government stays out of it) He said in his 1930 State of the Union Address: Economic depression can not be cured by executive action or legislative pronouncement. Economic wounds must be healed by the action of the cells of the economic body -- the producers and consumers themselves. If re-elected, he plans to emphasize confidence He plans to cut taxes to the wealthy, hoping that they will then invest in further business development He plans to give provide states with some money to build public woks projects He plans to lower federal interest rates on loans 1932 Campaign Slogan -- We Are Turning the Corner
1932: Choose your candidate! Fun Facts About FDR: Democrat He was the former Governor of New York He married his 5th cousin, He contracted polio from a swimming pool, which crippled his legs. Although he needed to use a wheelchair, he would never allow himself to be seen publicly in his wheelchair. The Oval Office desk was also widened to allow his wheelchair to fit without being seen. He had a secret affair with his former secretary, Lucy Mercer, which lasted until his death Spoiler Alert: He ll be the only President to get elected to 4 consecutive terms (but will die in the middle of his 4th term) 1932: Choose your candidate! FDR s Views: He believed that the government should take an role in helping offset the hardships of the Depression, and try to end the economic downfall He believes in or the idea that the federal government should have a role in providing a temporary safety net for its citizens who fall on hard times He believed in, meaning that the government would spend money from the public debt to create jobs and provide temporary aid in order to pump money into the economy He s willing to. He was fond of saying I have no expectation of making a hit every time I come to bat, what I seek is the highest possible batting average. He s proposing a which includes: Short-term (temporary) unemployed Promote industry through money for the American people, for the with federal with federal money to help them farm with smarter, more scientific methods, to cut their supply and thus increase demand Provide for those aged over 65 Campaign Slogan is Happy Days Are Here Again