The Great Depression in USA

Causes

Farm overproduction, unequality distribution of wealth, credit bubble, weak banking system, wall street crash, reduction of purchasing.

Farm overproduction

30% of US’s population lived in farms. They produced more than what they could consume.

Unequality distribution of wealth

1% of the population owned 33% of the wealth, while the 60% lived below poverty level

Credit Bubble

occurs when there is excessive lending and borrowing in an economy, leading to inflated asset prices and unsustainable debt levels.

Reduction of purchasing 

durable purchases such as cars and vacuums became a need. But due to their durability the purchases in the numbers of items sold decreased. Less production=less workforce

Weak banking system

occurs when there is excessive lending and borrowing in an economy, leading to inflated asset prices and unsustainable debt levels.

Wall Street crash 

stock market prices declined dramatically

Smoot-Hawley Tariff (1930)

it worsened the situation, reducing exports by 50% due to retalatory tariff from other nations.

Hoover’s response

Smoot-hawley tariff, laissez-faire theory, hoovervilles, denied the army bonus, increased taxes

laissez-faire

avoidance by governments from interfiering in the free market and let it fix itself

Hoovervilles

slam towns built by homeless Americans during the great depression

Army bonus

bonus payment certificate offered to veterans and their families. Hoover denied the demand and protest occured.

Roosevelt’s response

New Deal

First New Deal

Emergency Banking Act, Economy Act, brought down the dollar value, AAA and CCC

Emergency Banking Act

Stabilize large banks and mandated an inspection of banks before reopening.

Economy Act

balance the federal budget by cutting salaries and reducing pensions. Building trust in the US government

Agricultural Adjustment Agency (AAA) 

paid farmers to not grow 

Civilian Conservative Corps (CCC)

It hired young, unmarried men in projects such as construction of parks, roads and trails

Second New Deal

Social Security Act, Wagner Act, legal repercursions

Social Security Act

old-age pensions and employment compensation

Wagner Act

protects the rights of unions.

Legal challenges

AAA was found unconstitutional

Third New Deal

Fair Labour Standard Act, recession in 1937.

Fair Labour Standard Act

minimum wage to 25 cents and maximum working week of 44 hours.

New Deal’s outcomes

Economy grew, increased taxes and decreased spending, organisations meant to be temporary.