0008 The Great Depression and the New Deal (SMR 2.8) Flashcards
What was the Great Depression?
the largest economic failure of the 20th century, one of the major causes of WWII, starts because of the stock market crash in the US that impacted the rest of the world.
What did the 1920’s economy look like prior to the start of The Great Depression?
was a consumer based economy, major economic spending because people are able to keep their jobs, companies like Coca Cola are now trying to go public and open up to public investors therefore the stock market becomes huge, “get rich quick” attitude
Why was the economic structure of the 1920’s not sustainable? (4)
- Overproduction of manufacturers and farmers led to oversupply, deflation and unemployment
- Unequal distribution of wealth and income
- Availability of easy credit : people could even buy shares with credit (buying on margin) which created
- Bad banking structure
What created a glut in the market at the end of the 1920’s?
Overproduction of manufacturers and farmers. Once everybody already owned a washing machine, they stopped buying them and since every other country was recovering from WWI, there becomes a glut in the market
Why did the Stock Market crash in 1920?
everybody realizes that the price they bought their shares for are not actually worth that price, so there is a drive to sell their shares (and majority of people had purchased their stocks on credit)
From 1924 - 1929, there was a ________ market. What did this mean?
Bull
Everybody wanted to buy, buy, buy stocks and they were buying on the margin
What does “Buying on the Margin” mean?
buying stock with credit
How did the Psychology of Consumption impact the stock market crash?
The idea was that “things will get better” so people are buying stocks with 90% credit, thinking that the money will come in and make them a profit, and when they don’t , you can just sell
October 24th, 1929 is a date known as ______ and October 29th, 1929 is a date known as _______.
Black Thursday / Black Tuesday
What happened on October 29, 1929?
Black Tuesday, the stock market crashes: Everybody starts selling their shares (shares that originally cost $100, now give you $20, 90% of which is on credit)
What was Herbert Hoover’s political response to the Great Depression?
Overall conservative, Laissez-faire approach; unlike a natural disaster, an economic disaster is up for interpretation and Hoover believed that recessions always naturally come to an end and the market will pick itself back up BUT he didn’t realize that this left a gaping hole that would impact the whole world
What reasons did Hoover have for keeping the federal govt from initially intervening?
- Federal relief efforts violated the ideal of “rugged individualism”: the idea that we have the toughness to make it through, we don’t need the govt to do anything.
- He didn’t want to put massive amounts of federal $ into the problem because he believes it could cause a communist uprising
What was the Hawley-Smoot Tariff (sometimes called Smoot-Hawley Tariff)?
A tariff that Hoover signed in 1930 as a way to hopefully get money back into federal govt by raising tariffs on imports from foreign countries. Known as the highest protective tariff in US history
What was the result of the Hawley-Smoot Tariff?
actually worsened the economy, responsible for reducing american exports and imports by 60% in 1933
By raising tariffs on imports from foreign countries, the foreign countries retaliate by also raising tariffs or not buying from America at all
Because of this, companies have to cut pay or cut workers, and since the workers are also the consumers, this creates an even worse problem
What did Hoover do in 1931?
Balances budget and cuts spending
Hoover believes cutting spending will help so he pulls money out of circulation in order to balance the budget but his wrong policies deepen the depression
What did Hoover create in 1931 to provide aid for state and local govts?
Reconstruction Finance Corporation
What was the the highest protective tariff in US history?
The Hawley-Smoot Tariff (sometimes called Smoot-Hawley Tariff)
What was the Reconstruction Finance Corporation and was it successful?
A Hoover initiative that gave 2 billion $ in aid to state and local govts, made loans to banks and railroads and other companies, tried to put money back into circulation by giving money to businesses, but didn’t put money into hands of consumers fast enough
What public works did Hoover put into place? Was this successful?
The Hoover Dam,
Attempted to put money into hands of consumer by creating jobs through public works, is a success but is not successful enough as there are not enough public works to hire everyone
What ideas from Hoover would his successor FDR build upon?
Hoover’s ideas of Reconstruction Finance Corporation and Public Works
What event would essentially end Hoover’s presidency by decreasing his public opinion?
The Bonus March
What was the Bonus March?
A 1932 March of WWI Veterans who were demanding early payment of benefits/ bonus
June 1932: 15,000 veterans gathered in Washington DC
After Congress defeats the bill that would have granted their bonus’ early, veterans refused to leave
How did the Bonus March end?
July 28, 1932: after a month of sit in protests, Army is ordered to disperse marchers by force (awkward) – does not do well for Hoover’s public opinion
Who became President in 1932 after Hoover?
Franklin D. Roosevelt (Democrat)
What was FDR’s idea for ending the Great Depression?
- Argued for more interventionist government and direct relief programs
- Promised “a new deal” for the American people , promised to put in banking regulations and set up a system that would gradually fade into the background as the economy restarted
What “milestone marker” was created in FDR’s presidency that still exists today
His first 100 days
