The Great Depression and New Deal Flashcards
What was a Bank Run?
Banks don’t keep all customer deposits on hand; rather they lend out the funds to individuals or companies. A bank run takes place when many customers withdraw their money simultaneously, out of fear the bank may become insolvent, and was a common feature of the early 1930s.
As money is withdrawn the likelihood of default increases, thus triggering further withdrawals. Although it may be solvent, a financial institution drained of currency in a bank run may be forced to declare bankruptcy.
In mid-1929, there were already signs that the boom economy of the Roaring Twenties was slowing. What consumer purchase indicators presaged an economic slowdown?
Many consumers were no longer buying on the installment plan, having already purchased dishwashers, cars, and other goods in abundance. With wages stagnant many borrowers simply could not afford further purchases.
Despite the slowdown in consumer purchases, factories still continued to produce consumer goods in large numbers, creating a surplus.
The final “Black” day of the 1929 Stock Market Crash was “Black Tuesday,” when the market lost an additional 12% in value. What hastened the market’s collapse?
During the pre-crash boom, many speculators had purchased stocks on margin. As the stock market began to fall, brokers were forced to sell off the stocks purchased for their customers on margin. This created a snowball effect; as stocks continued to fall, more speculators were sold out.
How did the 1929 Stock Market Crash affect banks?
Many banks had invested in the market and faced significant shortfall; several faced insolvency. The Crash also prompted a run on gold deposits, further reducing the amount of deposits banks had on hand. As a result, banks curtailed their lending activities, contributing to an economic slowdown.
In 1932, Herbert Hoover attempted to revive the U.S. economy by signing the Emergency Relief and Construction Act. What did this act provide?
The Emergency Relief Act was the first ever federal relief act, which released funds for public works projects (such as highways and building projects) throughout the country.
The Emergency Relief Act was expanded by President Roosevelt as part of his New Deal line of programs.
In 1932, the Democratic Party nominated New York’s Governor, Franklin Roosevelt, to run against President Hoover. What were the central components of Roosevelt’s campaign?
Roosevelt sharply critiqued Hoover’s deficit spending, contending that government extravagance had led to the worsening Depression. Roosevelt promised to streamline the government, cut government expenditures by 25%, and balance the budget.
In addition, Roosevelt supported repealing Prohibition, hoping that grain purchases by brewers and distillers would raise crop prices.
President Franklin Roosevelt’s advisors, many of them professors from elite universities, were known as the _____ _____.
Brain Trust
Members of the Brain Trust were appointed to run several of the new federal agencies that appeared as a result of Roosevelt’s Hundred Days Legislation, including Rexford Tugwell who ran the Agricultural Adjustment Administration, and Hugh “Iron Pants” Johnson, who presided over the National Recovery Administration.
Passed as part of Franklin Roosevelt’s “Hundred Days” legislation, what was the purpose of the Public Works Administration (PWA)?
The PWA employed millions of unskilled workers on public works projects, such as building parks, post offices, and bridges.
What was a fireside chat?
On occasion during his four terms in office, President Franklin Roosevelt conducted radio broadcasts, during which he explained his perceptions of the problems facing the country and his proposed solutions. These talks with the American people were known as fireside chats.
During his presidency Roosevelt held 30 of these conferences, which typically began, “My friends, I want to talk…”
In an effort to halt falling prices (deflation), Congress ended the convertibility of paper dollars into _____ in 1933.
Gold
The United States was still ostensibly on the gold standard because the amount of paper currency was still limited by the amount of gold held by the Treasury.
Congress also made it illegal for American citizens to hold onto American gold dollars and other gold currency.
Receiving a federal charter in May of 1933, the _____ _____ _____ provided rural electrification in six Southern states.
Tennessee Valley Authority (TVA)
In addition to building power plants and running electrical lines, the TVA provided construction jobs and advised farmers on planting techniques, such as the use of fertilizer and crop rotation.
[Imagine. It is 1933 and these people had no electricity. Also they did not know how to farm!]
In late 1933, two thirds of states approved the Twenty-First Amendment. What did this amendment provide?
The Twenty-First Amendment ended Prohibition by repealing the Eighteenth Amendment. To date, the Eighteenth Amendment is the only repealed Amendment of the Constitution.
Historians typically divide Franklin Roosevelt’s New Deal programs into two periods; the First New Deal and the Second New Deal. What are the differences between the two?
The First New Deal focused primarily on the first of the three “Rs,” recovery, and the programs were mostly enacted in 1933. Many of these programs failed to boost the economy.
The Second New Deal focused on the second two “Rs,” relief and reform. Enacted after the Democratic victory in the Congressional election of 1934, the Second New Deal included programs like the Works Progress Administration and the Social Security Administration.
One of the last pieces of New Deal legislation was the Fair Labor Standards Act (1938). What did the Fair Labor Standards Act establish?
The Fair Labor Standards Act limited child labor for those under the age of 16. In addition, it established a minimum wage and the 40-hour work week.
Define Dust Bowl.
After years of poor farming techniques, a drought and high winds coupled to blow away the topsoil and create massive dust clouds in the Great Plains states, which were termed the “Dust Bowl.”
As their farms turned to dust around them, thousands of farmers migrated west to California, where they were known as “Okies,” regardless of their state of origin.
The Grapes of Wrath, by John Steinbeck, is a fictional account of the Joad family’s journey from the Dust Bowl to California.
