the great depression - causes and effects

who was Herbert Hoover

• Republican president - 1929-33

• trained as an engineer and made a fortune in the mining industry.

• an administrator appointed by Woodrow Wilson, he had played a great part in bringing relief to war-torn Europe in 1918–19.

• secretary of commerce in Coolidge’s Cabinet in 1921 for eight years.

• He was seen as partly responsible for the ‘boom’ years, which helped his victory in 1928.

Who was Franklin D. Roosevelt

• 1913, he was appointed as assistant secretary of the US navy.

• Suffered from Polio

• governor of New York - 1929.

• spent four consecutive terms in office.

• Redefined role of president

Principal reasons for the great depression - overview

• WW1

• weaknesses in US banks

• agricultural decline

• the policies of President Hoover between 1929 and 1933

• overproduction of commodities

• speculation and lack of investment

• declining export markets and tariff wars

• the collapse of European economies in 1931.

How much did the Dow Jones index rise between 1921-29

400%

What is speculation

Stock shares being bought and sold for more than they’re worth for a profit, expecting that they will rise in value.

Issues with the federal reserve bank

• Increased interest rates, cutting supply of money to country

• Head of bank dying with no replacement

• Loss of confidence

Problems with speculation

• Banks and insurance companies partook in speculation rather than smart investments

• Speculation was funded by borrowing, but loans were declining

What happened in the wall street crash

• Confidence collapsed

• Shares dropped in value by 40% in one day

• Individuals, companies, and smaller banks went bankrupt

How many US citizens owned stock shares

3%

How did the wall street crash affect most individuals

many lost their life savings in the collapse of banks and insurance companies that had been speculating with clients’ money.

How did the decline in agriculture cause the great depression

• Substantial section of the south struggled through the 1920s

• Droughts had devastated many areas

• Overproduction meant prices fell by 60%

How did industrial overproduction cause the great depression

In 1929 4.5 million cars were being produces in the US, however when this demand dropped it affected the motor industry AND the coal, steel, and other adjacent industries

How did US banking cause the great depression

the central bank and the federal reserve bank had limited regulatory powers. Most US banks were small and only served local communities with few reserved, deeply involved in speculation that caused the great crash (meaning the instantly collapsed)

How did tariff wars cause the great depression

Meant to protect american industry, other countries responded with hostility and equal tariffs, high foreign tariffs damaged the US which was the worlds largest exporter

How did lack of investment cause the great depression?

too much money in speculation and not enough in new plants, equipment, research, and training needed for industrial and business management

How did deflation cause the great depression?

Prices dropped in manufacturing and agriculture, discouraging investment and leading to a drop in spending by the american people - damaging the US economy by 1930

How many men were out of work by 1933

25%

Hoover mistakes

• Believed president should have limited role in economy

• Didn’t pursued federal reserve bank to increase supply of money in economy, to decrease deflation

• Didn’t veto smoot-hawley tariff act in 1930

• Agricultural tariff to aid farmers was hijacked by manufactured goods, leading countries to retaliate

• Insisted to stay on gold standard

• More concerned about a balanced budget

• opposed senate attempt to bring in unemployment insurance

issues with the gold standard

limited investment and borrowing.Cut the supply of money in the USA, and

led to further deflation.

What was the agricultural marketing act - 1929

tried to stabilise agricultural production by creating local co-operatives to deal with local issues (Didn’t do much)

What was the federal home loan bank act - 1932

designed to prevent foreclosures - congress reduced acts provisions, limiting its effect

What was the reconstruction finance corporation - 1932

provided loans to banks, insurance companies, and businesses (like railroads) to prevent collapse.

What was the relief and reconstruction act - 1932

Allowed $1.5 billion for federal spending on public works like roads to create jobs.

• 300 million allocated to the states to help with welfare (basically feeding hungry, too little considering mass unemployment)

Why didn’t hoover win the 1932 election

• Whilst 25% of population was unemployed, he cheered that the depression was over

• wages still falling, banks still collapsing

• Hoover lacked charisma, seemed uncaring and cold

Why did FDR win the 1932 election?

• Blamed Hoover for crash

• FDR was charismatic

• Utilized radio

• Brought unity to split

How did WW1 help the US economy?

• Countries who couldn’t trade with each other went to the US

• GNP (Gross national product) rises by 21%

• Became a creditor nation

US Debt in 1915 compared to 1919

1.2 billion → 25 billion

Example of company that benefited for WW1

Dupont chemical company - revenue up by 26%

Britain bought from Dupont as it couldn’t buy from Germany

Immediate post WW1 effects

• Soldiers hoe and want jobs

• Small arms factories → civilian goods factories

• Unemployment rises to 12%

• GNP falls by 10%

• General prices fall by 40%

How many Ford Model T cars sold in 1925 compared to 1929

2 million (‘25) → 4.5 Million (‘29)

What was the assembly line?

a line of machines and workers in a factory that a product moves along while it is being built or produced. Each machine or worker performs a particular job that must be finished before the product moves to the next position in the line

What percent did the us economy grow by in 1921-29

60%

How did America become a creditor nation?

Britain and France sold American company stocks to Americans to pay for war

3 Car companies leading industry

Ford, General motors, chrysler

How did mass production cause the great depression?

• Everyone produces

• Prices fall due to too much competition

How much did wages rise by between 1921 and 1929

38%

How did reliance on loans cause the GD

• Growing consumer culture relied on loans, only works if you can pay them back.