HOA PPP ESSAY UNIT #1

Structural Weaknesses in Society: Over production in industry Evidence #1

• Overproduction in agriculture and industry created a surplus of goods that outpaced consumer demand, driving prices down and crippling farmers and manufacturers

• Customers could no longer absorb the vast supply of goods, causing massive unsold inventory to accumulate in factories and farms. This overproduction, combined with reduced consumer spending, led to widespread economic instability and contributed to the Great Depression.

Structural Weaknesses in Society: Over production in industry Evidence #2

• Corruption in government and poor decision-making by the Federal Reserve Board compounded these issues

• Because interest rates were high and crop prices were low, farmers faced a brutal paradox: they had to produce even more wheat just to pay off their fixed machinery debts and taxes.

Structural Weaknesses in Society: Over production in industry Evidence #3

• Because farmers were overworking the land, it was failing. This caused soil depletion and set the stage for the Dust Bowl

• The Dust Bowl during the Great Depression in the United States was not only a result of environmental factors but also economic pressures that drove farmers to plow up the prairie grass during the 1920s.

• To combat this, as a part of the New Deal FDR passed the AAA (Agricultural Adjustment Administration) in 1933, which aimed to reduce crop production and stabilize prices by paying farmers to limit their output.

Credit, Banking, and Financial Stability: Evidence #1

• The “Roaring 20's” was a period of financial boom

• Society opinion of credit shifted from a elite business practice, to a widely available tool for everyday consumers through the rise of installment plans and finance companies

• Fueled consumer spending and instant gratification

• Investors also applied easy credit principles to the stock market, allowing them to purchase stocks "on margin" by paying a small fraction of the price and borrowing the rest.

Credit, Banking, and Financial Stability: Evidence #2

• Highly unstable, banks used their depostiers’ savings to speculate in the stock market

• Depositers had no idea their life savings were being gambled

• There was no federal guarantee for bank deposits, if a bank made bad stock market bets the people who kept their money there lost every penny

• Led to Glass-Steagall Act by FDR, created the FDIC to ensure people’s money stayed theirs.

Credit, Banking, and Financial Stability: Evidence #3

• The Roaring Twenties masked deep financial instability beneath superficial prosperity

• The Stock Market Crash came as a surprise to many, however many of the loose financial practices created a false sense of stability, with fatal hidden side effects

Stock Market Speculation and the Crash: Evidence #1

• Easy credit created the illusion of wealth for everyday people buy stocks, making them feel rich quickly as prices went up.

• This was fueled by consumers being able to “buy on margin” which allowed everyone to purchase stocks for a fraction of the price, this created a very fragile stock market

Stock Market Speculation and the Crash: Evidence #2

• The stock market unfolded over Black Thursday, Monday and Tuesday

• Black Tuesday was the worst day in stock market history

• resulted in a 12% market drop that officially kicked off the Great Depression

Stock Market Speculation and the Crash: Evidence #3

• Hoover’s response to this was based off of volunteerism and he believed that the crash was temporary, and heavily opposed direct federal handouts to citizens

• The response was seen as inadequate, and homeless shantytowns became known as Hoovervilles

• FDR’s response came in 1933 when he officially laucned the New Deal based on recovery, relief, and reform, which came with “alphabet soup” agencies to create jobs (CCC-hired young men to plant trees and build parks, WPA-hired millions to build roads, bridges, and schools)