Warm-Up Nov 17

1. Warm-Up Nov 17 4. October 29, 1929, the day when stock prices took the steepest dive of that time, is known as A. Black Thursday B. Black Tuesday C. Bloody Monday D. Panic Tuesday

2. Warm-Up Nov 18 5. Beginning in 1932, American pastures and wheat fields from the Dakotas to Texas became a vast A. Bread Basket B. Mud Basin C. Dust Bowl D. Prairie

3. Economic Troubles on the Horizon • Problems began threatening economic prosperity by the end of the 1920s • Farm debt - many farmers were forced to sell in the 1920's • Consumer debt - many people were buying goods on credit • More goods then buyers - prices rose faster than wages • Declining Trade - 1920's U.S. raised tariffs other countries raised tariffs to retaliate • Important industries struggled • Income disparity - Consumers & farmers went steadily deeper into debt

4. Industries in Trouble • Key industries like railroads, textiles, steel barely made profit • Replaced by other forms of transportations • Mining, lumbering expanded during were no longer in high demand • Coal especially hard-hit due to availability of new energy sources - Hydroelectricity, fuel oil, & natural gas • Boom industries - automobiles, construction, consumer goods weakened • Housing starts declined - Affected many related industries

5. Farm Troubles • International demand for U.S. grain declined after war - prices dropped by 40% or more • Farmers boosted production to sell more - Caused prices to drop further • Farm income declined & farmers defaulted on loans • Rural banks failed • Congress attempted to pass the McNary- Haugen bill to help farmers - Price-supports - government bought surplus crops at guarantees prices - President Coolidge vetoed price-support bill

6. Consumers Problems • 1920s - rich got richer & poor got poorer • Prices rose faster that wages • 70% of families earned less than minimum for decent standard of living - $2500 annually • Most couldn’t afford flood of products factories produce • Many people had been purchasing goods on credit (buy now, pay later) • Businesses gave easy credit & consumers piled up large debts • Consumers had trouble paying off debt & cut back on spending

7. Democrat Alfred E. Smith - four times governor of New York Republican Herbert Hoover has served as secretary of commerce under Warren Harding & Calvin Coolidge U.S. had experienced prosperity under Republicans in 1920s Hoover won an overwhelming victory The Election of 1928

8. Dreams of Riches in the Stock Market • Late 1920s – Some economist warning of weaknesses in the economy - Most Americans ignored them • People began investing in stock market - Looked like an easy way to make money • Dow Jones Industrial Average was used as barometer of the market’s health - Measure based on the stock of 30 representative large firms trading on the New York Stock exchange tracks state of stock market

10. How the DJIA is Calculated • Calculation • To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor. The divisor is adjusted in case of splits, spin offs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. The initial divisor was the number of component companies, so that the DJIA was at first a simple arithmetic average; the present divisor, after many adjustments, is less than one (meaning the index is actually larger than the sum of the prices of the components). That is: • where p are the prices of the component stocks and d is the Dow Divisor. • Events like stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow divisor is updated so that the quotations right before and after the event coincide:

11. 1920s - stock prices rose steadily “Bull Market” People rushed to buy stocks & bonds to make a quick profit - Many engaged in speculation - buy on chance of a quick profit - Began Buying on margin - pay small percent of price, borrow rest Dreams of Riches in the Stock Market

12. September 1929 stock prices peaked & then fell Many investors lost confidence & began selling October 24, 1929 - Market took plunge & many panicked investors unloaded their shares The Stock Market Crashes

13. October 29, 1929 - Stock market crashed (Black Tuesday) - Shareholders sold frantically - Millions of shares had no buyers - People who bought on credit were left with huge debts - Others lose most of their savings The Stock Market Crashes

14. Financial Collapse • Great Depression - economy plummeted & unemployment skyrocketed - lasted from 1929–1940 • After crash, people panicked & withdraw money from banks • Banks that invested in stocks failed& people lost their money • 1929 to1932 - gross national product was cut nearly in half - 90,000 businesses went bankrupt • 1933 - 25% of workers were unemployed • Those with jobs received cuts in hours & pay

15. Worldwide Shock Waves • Great Depression limited U.S. ability to import European goods • Hawley-Smoot Tariff Act set highest protective tariff ever in U.S. • Other countries couldn’t earn American currency to buy U.S. goods - Many countries retaliated by raising their own tariffs • International trade dropped & unemployment soared around world

16. Causes of the Great Depression • Factors leading to Great Depression: • Declining Trade - Tariffs & war debts cut down the foreign markets for American goods • Farm problems - Many farmers were forced to sell • Easy credit – Borrowed money to invest in market • Income disparity • Federal government kept interest rates low & encouraged borrowing

17. People lost jobs & were evicted from homes Had to live in parks or sewer pipes Shantytowns - settlements consisting of shacks, arose in cities The Depression Devastates People’s Lives

18. People dug through garbage & begged - Soup kitchens offered free or low-cost food - Bread lines - people lined up for food from charities & public agencies African Americans & Latinos had higher unemployment & lower pay Minorities were also targets of violence (Lynching or deportation) The Depression Devastates People’s Lives

19. Most farmers could grow food for their families About 400,000 farms were lost through foreclosure - Many became tenant farmers The Depression in Rural Areas

20. Farmers in Great Plains exhausted land through overproduction 1930s - drought & windstorms scattered for hundreds of miles Dust Bowl - area from North Dakota to Texas that was hardest hit The Dust Bowl

25. Many farm families migrated to Pacific Coast states (Route 66) - California towns became overcrowded - Many people who moved west were from Oklahoma (Okies) The Dust Bowl

26. Many men used to working & supporting families had difficulty coping Couldn’t find jobs Manny stopped trying Some men even abandoned their families - About 300,000hoboes wandered country on railroad box cars No federal system of direct relief - cash or food from government Men in the Streets

27. Women worked hard to help their families survive the adversity Homemakers budgeted carefully, canned food, & sewed clothes Women worked outside home & were resented by unemployed men Women Struggle to Survive

28. Early 1930s – Some cities refused to hire married schoolteachers Many women suffered in silence & were ashamed to stand in bread lines Women Struggle to Survive

29. President Herbert Hoover told Americans the economy was sound Many experts believed depressions were normal part of business cycle - Believed that it was best to do nothing & let the economy fox itself Hoover believed government should foster cooperation between competing groups Hoover Tries to Reassure the Nation

30. Hoover Tries to Reassure the Nation • Many believed that people should succeed through their own efforts • People should take care of own families & not depend on government • Hoover opposed any form of federal welfare or direct relief to the needy - Believed that hand-outs would weaken people’s self respect & moral fiber - Said that charities & local organizations should help the less fortunate

31. Hoover’s authorized the construction of the Boulder Dam on the Colorado River - later renamed Hoover Dam - Provided electricity, flood control, water to states on river basin Hoover Takes Cautious Steps

33. Democrats Win in 1930 Congressional Elections • People began blaming Hoover & Republicans for the economic problems • Democrats won House of Representatives • Republican Senate majority down to 1 vote • People Grew frustrated with the Depression

34. Farmers tried to create food shortages to raise prices Burned fields rather than sell crops at a loss Some declared a farm holiday People began calling shantytowns “Hoovervilles” Democrats Win in 1930 Congressional Elections

36. Hoover softened his stance on no government intervention in the economy Hoover negotiates agreements among private entities Backs Federal Farm Board (organization of farm cooperatives) - buy crops, keep off market until prices rise Hoover Takes Action

37. Hoover Takes Action • Got large banks to establish National Credit Corporation - Loaned money to smaller banks to prevent bankruptcy • Late 1931 - Hoover persuaded Congress to pass measures reform banking, provide mortgage relief, & funnel federal money into business investment - Federal Home Loan Bank Act lowered mortgage rates

38. Hoover Takes Action • Reconstruction Finance Corporation – Authorized emergency funds for businesses - Hoover believed that the money would tickle down to average citizens through job growth & higher wages - Critics said people couldn’t wait for the money to trickle down • Hoover’s measures didn’t improve economy before presidential election

39. 1932 – Incident with World War I veterans further damaged Hoover’s image & public morale 1924 – Congress agreed to pay a bonus to WWI vets who had not been adequately compensated for wartime service - Bonus was to be paid in 1945 in the form of cash & a life insurance policy Gassing the Bonus Army

40. Bonus Army – WWI veterans went to D.C. in 1932 to support Patman Bill: - called for immediate payment of bonus to WWI vets ($500 per soldier) Gassing the Bonus Army

41. Hoover opposed bill Believed they were communists He respected their right to protest (Provided food & supplies for shantytown) June 17, 1932 - Senate voted down Patman Bill Most veterans left Washington About 2,000 stayed to speak to Hoover Gassing the Bonus Army

42. Hoover feared violence & called on U.S. Army to disband Bonus Army - Led by General Douglass Macarthur & Major Dwight Eisenhower Gassing the Bonus Army

43. Infantry tear gassed over 1,000 people, including children Many people were injured (11 month old baby died) Public was stunned & outraged by government’s actions Gassing the Bonus Army

44. Democrats nominated NY governor Franklin Delano Roosevelt - reform-minded; projected friendliness & confidence Democrats overwhelmingly won presidency, Senate, & House Election of 1932

46. Warm-Up Nov 19 6. What was the period called between march 9 and June 16, 1933, when Congress passed 15 major acts to meet the economic crisis? A. the First New Deal B. the New Nationalism C. the New Freedom D. the First Hundred Days

47. Roosevelt had to wait 4 months to take over 20th Amendment wasn’t rarified until 1933 (Move inauguration to January) FDR worked with advisors known as “Brain Trust,” to formulate policies to alleviate problems New Deal – FDR’s program to alleviate the problems of the Great Depression focused on 3 Rs Relief for needy Economic recovery Financial reform Election of 1932

48. March 9 to June 16, 1933 - FDR took office & launched Hundred Days Congress passed over 15 major New Deal laws that expanded the federal government’s role in the nation’s economy The Hundred Days

49. Bank Holiday • March 5, 1933 – one day after taking office FDR declared a bank holiday & closed all banks to prevent further withdrawals • Emergency Banking Relief Act - Permitted Treasury Dept. to inspect banks • Sound banks were allowed to reopen • Banks that needed help received loans • Insolvent ones remained closed (unable to pay bills) • Bank Holiday revived public confidence in banks • - Believed that the banks remained open were in good shape

50. FDR gave fireside chats - radio talks explaining New Deal measures March 12, 1933 – FDR gave 1st fireside chat the day before the banks reopened after holiday - Discussed need for public support of government, banks An Important Fireside Chat