USA Flashcards
3 causes of the Wall st crash of 1929.
One cause of the wall st crash was the over-confidence of americans. In the 1920s share prices continuously rose and many americans had the impression investing in the stock market was an auspicious business that was practically a one-way bet. This elicited the over-confidence of regular americans in the stock market and even caused some regular americans to start buying shares on margin.
Another cause of the wall st crash were ‘bull pools’. Also know as ‘pump and dump’ investing, groups of traders who practiced this form of investing set out to artificially increase prices by repeatedly by shares from each other. This fooled less experienced investors who already had a tendency to invest irrationally because of their over-confidence into buying these shares. This meant that the price of shares were no longer driven by economic fundamentals but rather by the irrational exuberance of regular americans. This led to an unrealistic surge in prices - 1925 - total value of shares: $34 billion –> 1929 - 64 billion
Economic boom period of 44 months following WW1 induced the over-confidence and decadence of certain americans.
Factors that accentuated the effects of the Wall st Crash:
Fall in the demand for agricultural goods after ww1 led to the fall of the price of crops which affected farmers’ income. Farmers started to migrate from rural to urban areas seeking for jobs.
Small banks that comprised most of the banking sector did not have the cash to handle the masses of customers who wanted to withdraw their savings. Customers only got 10 cents on the dollar back from their savings accounts since banks illegally reinvested this capital without their clients knowing.
Germany was one of the european countries in desperate need for US financing, and when the USA recalled their loan, Germany went in a state of chaos with imminent hyperinflation.
Increase in number of shares available to buy from 1925 to 1929?
500 thousand –> 1.1 million
as a result, businesses had more capital to expand their operation and hire more people
How many shares unloaded on ‘Black Tuesday’ and on ‘Black Thursday”?
13 million and 16 million shares unloaded en masse
Evolution of the price of shares through the Crash (General motors)?
March 1928: 1.40$ –> September 1929: 1.82$ –> 13 November 1929: 0.36$
How much money lost?
26 billion of value vanished
Consequences of the Crash on banking?
From 1930 onward, 9 thousand of 25 thousand banks existing since 1925 were closed and 650 closed directly due to lack of capital.
9 million Americans lost 2.5 billion in savings
1930 - New York City Bank unable to pay 400 thousand of its clients their savings of 286 million
Consequences of the crash on agricultural sector?
Farmers’ earning went from 6 billion in 1929 –> 2 billion in 1932 due to the fall in crop prices
Demand was nowhere near as high after the war despite the means of production(mechanized and improved farm practices) being able to capacitate the same high levels of production which led to the surplus of crops
Since their income was undermined, they could not maintain their business and redeem the loans and mortgages they issued to buy land and equipment –> 1/3 of farmers lost their land and rural to urban migration led to 2 million settling in sprawling cities
Aims of FDR?
Recovery: End to crisis in industry(higher rates of production), banking and agricultural(increased income for farmers) sectors
Relief: Fulfill immediate need of food with short term projects, alleviate effects of unemployment by providing states with funding
Reform: reform US through Social Security and regulation of banks and businesses to protect its citizens, reorganization and expansion of the federal government, stimulation of the economy in order to restore jobs, thus consumer spending –> ‘priming the pump’
1st 100 days?
‘Brains trust’ - group of specialists advising FDR
‘Fireside chats’ - evening radio addresses given by FDR to his listeners(52 million)
Emergency Banking Act - Banks forced to close for 4 days to be audited(financially inspected), and only stable ones to be reopened
Beer and Wine Revenue Act - alcoholic beverages below 3.2% to be taxed in order to raise money for New Deal
AAA? ND
Offered subsidies to farmers to lower supply and prevent surplus; 11$ for each acre a farmer didn’t use –> demand staid just as low but supply decreased, thus prices rose again
Paid farmers to store products
FCA set up to improve mortgage contracting; helped 20% of farms
CCC was set up since AAA was not enough
NRA? ND
Set quotas on production, controlled prices
Imposed industry-wide codes of practice; banned child labor, limited working hours, eliminated unfair trade practice –> acted like a trade union
Blue NRA Eagle raised popularity among workers
2.3 million NRA businesses by 1933
FERA? ND
Passed in the 1st 100 days
granted 500 million $ to states to spend on relief; was not to be redeemed
HORA? ND
Increased mortgage maturity term from 5 to 30 years –> 1 million were able to keep their homes
CCC? ND
Gave young men manual labor jobs for 30$/month on environmental projects
Only accepted 17-23 year old, so only employed 500 thousand by 1935, however over its entire course, it employed 3 million young unmarried men in total
TVA? ND
Southern states had hot helped citizens enough, so the Tennessee Valley Authority was set up to help 7 states recover and relieve immediate needs:
Provided work
extended electrical coverage to farms
controlled flooding and improved land productivity
1936 - Completed its first project, the Norris Dam
20 dams planned to be built
Educated farmers on safe farm practices to hedge against environmental disasters
2nd D?
2 years of ND since 1933 and income was still low
November 1934 Congressional elections brought reformist politicians + Supreme Court shut down some ND agencies –> 2nd Deal
WPA? 2nd D
Harry hopkins in charge
Spent 11 billion$ on short-term work schemes that employed 8 million
Mostly employed unskilled workers in manual labor and built public works infrastructure projects; e.g. road building
also helped students stay in college, organised sewing classes for women, guidebook writing for artists
e.g. National Health Survey which revealed 2 million cases of serious illnesses go without treatment every year ++> WPA sends nurses to the homes of the poor, builds hospitals, provides medical and dental treatment to those who otherwise cant afford
Shortcomings of the WPA? 2nd Deal
WPA’s quota limited its effects; in NY, it employed 225 thousand but left 750 thousand without help because it had reached its quota
Housing? 2nd Deal
Resettlement Administration built suburban towns for the homeless
-Only 3 were constructed + Congress legalized the Housing act to replace shanty towns
Farmers? 2nd Deal
AAA was revoked by SC in 1936
2nd AAA imposed compulsory quotas to limit production –> any surplus was heavily taxed –> helped FG control prices
FSA(farm security administration) set up in 1937:
Provided cheap loans to buy farms; by 1941, $1 billion had been issued in loans
set up migrant camps with doctors for migrating farmers moving into cities
Pensions and social security? 2nd D
FDR created social security in 1935
Before 1935, USA had no national pensioning system:
-Employees paid 1% income to pension fund; matched contribution by the employer
-Employer of more than 8 paid payroll tax to provide unemployment insurance at half the normal rate
Federal grants to states dedicated to poor, old and disabled
Impacts –> $50 million set aside for elderly, and 25 for for children
by 1939 –> 7000 children helped
Shortcomings of the pension system? 2nd D
Domestic servant and agricultural workers not included
Self-funded so could not act immediately
NLRA (Wagner Act)? 2nd D
NRA was invalidated by SC in 1935
NLRA replaced it:
Strengthened trade unions: workers were legally entitled to join, firing union members unfairly was banned; NLRB (National Labour Relations Board) hosted union negotiations, legal counseling to fired workers
Union membership rose to 9 million in 1940
NLRB lawyers in 1935 = 14 –> in 1939 = 226
Many unions still went on strike to gain the recognition of companies
Banking act of 1935? 2nd D
created a board of Governors for the Federal Reserve System (Fed)
Entitled this board to financial powers taken away from big banks –> 1936: no national banks closed
only 2500$ was bound to be payed as deposit insurance
Rural Electrification Administration (REA)? 2nd D
in 1930 –> electricity in 10% of farms, 1% in less developed areas, companies didn’t bother to run wire to remote farms
At first, Rural elec. projects were done by TVA:
Electric Home and Farm Authority aided farmers to buy electric appliances
Issued loans and instalment plans to buy them
From 1935, REA took over
1941 –> 35 % of farms electrified
417 co-operatives contracted loans to lay wires
EHFA(a federally owned corporation) had arranged 100 thousand contracts for electrical goods by 1938
Shortcomings: companies built spite lines close to a proposed co-op line, linking up rich neighborhoods and leaving out the poor and making it harder to gain permission from the REA to build their own inclusive lines for others.
Overall achievements of ND for recovery?
Farm income increased from 2 –> 4 billion
RFC(gov agency to aid corporations, etc) helps 6000 banks become operational again
Unemployment: 1933 = 13 million –> 1939 = 9.5 million
Overall shortcomings of ND for recovery?
Tenant farmers evicted from land and depended on grants
1929 –> 3% unemployed; 1939 –> 17% unemployed
reliance on government; FDR tried cutting federal spending dedicated to re-stimulate the economy –> unemployment rose to 5%
Achievements of ND on relief?
WPA employed 8 million
people that received financial aid –> 35 %
Shortcomings of ND on relief?
Only 40% of applicants accepted into WPA; 750 thousand left unemployed compared to only 250 thousand accepted in NY since quota was already reached
Achievement of ND on reform?
Social Security: federal help for the 1st time
Electrification of farms
Recognition of unions
Banking reforms: Banking Act 1935
Women’s division in the WPA gave specific help: sewing classes, etc
30% –> black families received relief aid
Indian Reorganisation Act –> re-entitled 7.4 million acres of land to Indians
Achievement of ND on reform?
Social Security: federal help for the 1st time
Electrification of farms
Recognition of unions
Shortcomings of ND on reform?
Many ND relief programs paid by workers’ wage rather than just taxation of rich
CCC –> 2.5 million jobs for men - only 5 thousand for women
AAA racism: black tenants thrown off farmlands
Indians heavily-dependent on WPA; left without income when closed
Judicial opposition to ND?
SC could block New Deal laws; most justices were against FDR:
“Sick Chicken Case” - poultry company sued NRA for fining them for not respecting sanitation codes, claiming NRA had no right to inspect this –> case supported by SC and effectively ended the NRA
1936 –> cotton producer challenged AAA, claiming it could not tax him –> SC supported case once again and dismantled AAA
1937 –> FDR demands the appointment new judges for everyone over 70, meaning replacement of 6 of 9 SC judges –> Congress, angered, prevents this but SC receives message and stops challenging ND
Republican Opposition?
FDR was democrat
Reps. believed FDR admitted too much power and [money] to alphabet agencies; reps. known for believing in laissez-faire policy and volunteerism(government can only encourage, not force)
1936 –> little success, as policies did not appeal to the population ++> 1937 - Recession reacted against by voter by voting Republican, FDR demand to fire SC justices –> loss of support
1938 Elections?
Reps. form coalition with dissatisfied southern Dems and garner enough strength to oppose ND
Budget of relief programs cut
Investigation of alphabet agencies –> try to weaken WPA and NLRB through accusations of being communists
New measures such as housing plan and relief programs blocked in 1939
Huey Long? Opposition to ND
Member of Senate and ex-governor of Louisiana from 28 to 32
Left-wing populist member of Dem.
known for:
Heavily taxing big businesses and the rich –> instituting social services and welfare programs with money obtained; free textbooks for students, etc
“Share our Wealth” - 1934:
Proposed in a national radio address; capping personal fortune at 50 million, annual income to 1 million, and inheritance to 5 million
Took all annual income over 1.8 million –> distributed it to the poor households who were bound to receive at least 2500$ a year ++> not enough rich to fund the program
Over 8 million joined
Could have had an influence in the 1936 elections but was assassinated in 1935
Objections of Huey Long?
Objections:
NRA controlled by big businesses
AAA left poor tenant farmers homeless
Social Security Act did not reduce the wealth gap
Father Coughlin? Opposition to ND
Catholic priest near Detroit
Addressed 30 million listeners on his radio show, ‘the Golden Hour with the Little Flower’ –> politicians took him seriously because of the magnitude of the effect of his show
Blamed Depression on Wall St and international bankers –> claimed ND was influenced by them, rendering it ineffective
1934 - set up National Union for Social Justice
Calls for currency and banking reforms + nationalisation of certain parts of economy
More just taxation system
1936 - Teamed up with ‘Share our Wealth’ and Francis Townsend –> form National Union Party; William Lemke as presidency candidate ++> FDR beats Lemke with 27.8 million to 828 thousand votes
Lost support as his broadcasts became increasingly anti-Semitic
Objections of Father Coughlin? Opposition to ND
Objections:
Depression caused by Wall St financiers
Claimed ND was influenced by Wall St, thus was rendered ineffective
Believed FDR was communist puppet
Increase in spending on leisure activities?
1.8 billion more in 1929 than ten years ago
Cinema tickets sold?
in 1924, 40 million tickets each week –> figure more than doubled in 1929
First film with sound?
the Jazz singer, 1927()
Revenue of film industry?
$2 billion each year
What were the three main popular forms of leisure in the USA?
Sports
Cinema
Jazz and dancing
Radio and advertising
Effect of economic boom?
Americans had more money and time to spend; average income had risen by 30% in the 1920s, but work hours were shorter. This induced americans to partake in leisure activities
Baseball world series - Sport?
300 thousand people in 1921 went to watch the event
Number of radios in the USA?
60,000 in 1920 –> 10,000,000 in 1929
combined value of all shares traded on wall St?
1925: $34 billion –> 1929: $64 billion
effect of the Great Plains drought?
17 million Americans in the eastern USA affected, ruined crops in the summer of 1930, dust storms rendered the land uncultivable —> farms failed because of how little land was available for growth and livestock –> no income, 1 million left their farms on the Great Plains and migrated to states with available jobs
Economy Act? New Deal
reduced government running costs by 25% which lowered federal spending by around $450 million
Volume of advertising sector?
by 1929 - $2 billion spent on advertising and 600,000 people employed in the industry.
Impact of depression: Banking?
banks had to close - from 1930 to 33, 9 thousand of 25 thousand banks that existed since 1925 had to close –> 400 banks went bankrupt directly due to a lack of cash
9 million americans lost 2.5 billion in saving
New york city bank leaves 400 thousand americans without savings of 286 million in 1930
Immpact of depression: Agriculture?
farmers’ earnings went from 6 billion in 1929 –> 2 billion in 1932
farmers could pay the mortgages and loans they took out to increase efficiency –> 1/3 of farmers lost their land
protests and a rural exodus; 2 million settling in sprawling cities
1930 - drought affecting 17 million created huge dust storms in the Great Plains –> stripped top soil –> midwest unable to grow crops –> 1 million ‘Okies’ emigrated to California and worked in starvation wages and ramshackle settlements
impact of depression: Industry?
national business profits went from around 10 million in 1929 to 3 million in 1932
Wages were cut by 50% from 1929 to 1933
half of Ford’s detroit workforce was made redundant –> despite cutting running costs, 70 thousand factories were still closed by 1933
impact of depression: people?
unemployment: 3% in 1929 to 25% in 1933
20 thousand malnourished children in NYC in 1932
Families resorted to relief, such as soup kitchens, charities or local government –> However, there were no national benefit programmes
1931 - 20 thousand homeless children in NYC
1 million had to travel around by foot or train, seeking work
impact of depression: Hoovervilles?
aggregation of homeless people to make shanty towns
Seattle - Jesse Jackson declared himself mayor of Hooverville
government officially acknowledged Hooverville settlements of 9 acres
impact of depression: Bonus marchers?
Congress law in 1924 stated WW1 veterans would receive a $625 bonus in 1945
Veterans in hardship because of depression demanded the bonus immediately
1932 - 20 thousand marched on Washington and settled outside the city
After fierce debate, Congress rejected their demands but granted 100 thousand to help Bonus marchers pay for their journey home
5000 veterans stayed behind
First, police were sent in but were attacked and killed two veterans
then, Hoover sent in the US army –> troops burnt tents and teargassed marchers –> 100 marchers injured and one of their children killed
Hoover’s reputation was destroyed
Hoover’s measures: banking?
National Credit Corporation - raised 500 million to help banks/ investors were afraid to lose their money and spent little of it
Reconstruction Finance Corporation - 2 billion raised by government to rescue banks/ criticised for helping banks and not the people + only 30 million had been lent by 1933, due to stringent requirements
hoover’s measures: agriculture?
Agricultural Marketing Act, 1929: set up Federal Farm board to buy up crops/ did not stop falling prices
Hawley- Smooth tariff, 1930: raised import duties on foreign food by 40% to force people to buy American/ other nations did the same, which reduced international trade
Federal Farm Loan Act, 1932: 125 million budget to provide farm mortgages/ it did not help repay the mortgages
Hoover’s measures: Industry?
NBSC: conference of 400 executives to make promises about wages and employment/ many of the promises made were broken when the depression worsened
hoover’s measures: unemployment?
Public Works: government doubled spending on public works over 3 years –> made project like Grand Coulee Dam/ Federal spending on public works was only 210 million, eclipsed by states’ annual spending of 2 billion
