Economy showed many signs of traumatic problems Ag Construction projects down Businesses that drove the 20’s growth were slowing

CHS 22- GREAT DEPRESSION/ NEW DEAL

NOT SO GOOD?

COOLIDGE

1925-1929

Economy showed many signs of traumatic problems Ag Construction projects down Businesses that drove the 20’s growth

were slowing All except stock market- which turned

sharply upward ======= Speculation

AGRICULTURE IN THE U.S.

Strongly supported Industrial Growth Now at the end of its rope Overproduction created low prices and poverty

This causes banks to fail throughout the 20’s in rural areas

No one is buying anything because no one has money in Rural America.

Serious problem of Unequal Growth Consumerism grinds to a halt slowly before 1929. Credit Problems

DIRT FLOOR POOR

GROWTH IS REAL IN SOME SECTIONS National Income 59 Billion to 87 Billion A person’s average income 522 to 716 1.2 million cars- 1914 26 million cars – 1929 Air travel 10 Million women gainfully employed U.S.A- 34 % of World’s Economic

Production

FALSE GROWTH

COOLIDGE AND HOOVER

Both Knew something was going to go wrong

Both were too connected with Business to step in and regulate what was wrong with the market.

Coolidge’s Greatest Crime = Doing Nothing Coolidge’s Family Hoover ran the economy from 1924-1930

COOLIDGE

Harlan Fiske Stone- Coolidge’s closest advisor had studied the markets. Boom was coming to bust.

Grace Coolidge, “Poppa says there is a depression coming.”

“I know how to save money. All my training has been in that direction. The country is in sound financial condition. Perhaps the time has come when we ought to spend money. I do not feel I am qualified to do that.”

FIXING THE SITUATION

Let Interests start to go upward Hoover kept them down

Regulate the stock market Hoover failed to check the speculation

Disallow the cheap easy credit without cash

Changes would have equaled Recession instead of Great Depression

Slow time instead of the crash

BUYING IN THE STOCK MARKET 1920’S Arthur A. Robertson

“I saw shoeshine boys buying $50,000 worth of stock with $500 down.”

Today if you want $100 of stock you have put up $80. In those days you could pay $8 on the same $100

Buying stock with no money down is dangerous. Stocks crash, companies call in debts and you have

to pay. Sell you car, house, and possessions to pay the money you owe.

BERNARD BARUCH

Wall Street Watcher- Paul Warburg- warning

Baruch, Kennedy, and Rockefeller and others get out of the market between March and September 1929

“I have heard many men talk intelligently, even brilliantly, about something -- only to see them proven powerless when it comes to acting on what they believe.”

    One of my favorite stories of the park bench advisor came in 1929, when Wall Street was in a bull market frenzy.  Baruch worried that the market was getting too speculative, and started liquidating stocks and investing in bonds, gold, and “hard cash.”  In the spring of 1929, the famous humorist Will Rogers asked Baruch for advice.  Rogers told Baruch he had nearly a million dollars to invest, and wanted to invest it in the stock market. 

    Baruch warned him, “What you want to do is gamble.  But I want to tell you that you’re sitting on a volcano.  That’s all right for professional volcano sitters, like myself, but an amateur like you ought to take to the tall timber and get as far away as you can.  There may come a time when the man who holds your mortgage will want his money and you may not have it, and your friends won’t have it either.”

    Two years later, after the crash and the middle of the Great Depression, Baruch ran into Will Rogers at the Capitol in Washington DC, and asked him, “Will, how did you come out of this?”

    “I did what you told me,” Rogers said, shifting his gum, “and you saved my life.”

OCTOBER 1929

Great Crash----- only Wall Street Crash itself is like the match that starts the

Great Depression Some historians believe it had nothing to do

with the Great Depression Its all connected Average Joe-> never knew what happened on

October 29th - Black Friday, Black Tuesday Suicides Crash starts the fall of dominoes

GREAT CRASH

 1.  Don’t speculate unless you can make it a full-time job.

    2.  Beware of barbers, beauticians, waiters--of anyone--bringing gifts of “inside” information or “tips.”

    3.  Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth. 

    4.  Don’t try to buy at the bottom and sell at the top.  This can’t be done--except by liars.

    5.  Learn how to take your losses quickly and cleanly.  Don’t expect to be right all the time.  If you have made a mistake, cut your losses as quickly as possible. 

    6.  Don’t buy too many different securities.  Better have only a few investments which can be watched. 

    7.  Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.

    8.  Study your tax position to know when you can sell to greatest advantage.

    9.  Always keep a good part of your capital in a cash reserve.  Never invest all your funds.

    10.  Don’t try to be a jack of all investments.  Stick to the field you know best.

CAUSES OF THE CRASH

Bills in Circulation- 3.68 Billion-1920 3.64 Billion-----------1929

Credit $45.3 Billion $73 Billion ------------1929

Problem is inflation of credit---- Govt keeps interest rates too low Speculation in the Stock Market Unequal growth in economic sectors

WHAT HAPPENDED

Natural Market forces should have lowered stocks to decent prices according to earnings in 1928. Speculators threw it higher for a year after this point

End of 1928- credit inflation ends Spring/summer of 1929 Economy started to

decline 6 months later Sept- Oct 1929-Stock Market crashed 3

months later

CRASH ITSELF

$50 Billion gone in the two weeks in October

Oct. 29th – the crash date

Week before was just as bad

11 high profile suicides by Nov. 1

STOCKS

1929 1932

Chevrolet 73 8 U.S. Steel 262 22 AT&T 304 72

GREAT DEPRESSION DOESN’T START RIGHT AWAY

Banks start to close People lose checking/savings accounts Businesses close People lose pay checks No spending Spiral downward keepsContinuingTakes three years to sink in

HOOVER’S ATTEMPTS TO FIX IT

Keep Wages High Keep Credit Rates low Added $300 Million in Credit in Oct. 29 alone Spent more Gov Money than before

Public projects Reconstruction Finance Corp- money to banks

Congress disagreed and reigned his spending in

Lost public and political favor

PUBLIC WORKS PROJECTS

HAWLEY-SMOOT TARIFF

Killed American exports- International trade flatlined- supposed to help American business- in effect it killed it

Tariff was a huge tax on imports Europe collapsed on this and no one bought

our goods. By the time Hoover reacted to allow

Germany and Britain to forgo WW1 debt, all business had collapsed

Once Int. trade goes, all of our banks shut

GREAT DEPRESSION SETS IN

Unemployment- 3.2%-29 24.9 in 33 300,000 children out of school in NY- Among those attending 20% malnutrition 40 million people with no income at all 1500 colleges went bankrupt-enrollments

fell Libraries didn’t buy books If you are hungry stay home and keep

warm

WONDERBOY TO THE RESCUE?

Many thought this was Hoover’s time He became bitter and embattled, beset

with failures Volunteerism, Spending, nothing worked Public lost faith and blamed him Frantic action (start of New Deal

programs?) sent things downward “Politicians that the gods wish to destroy

run out of luck too”

FDR- BEATS HOOVER IN 1932

Any candidate could have run and won against Hoover- Bonus Army incident in Summer of 1932 last straw

Some correspondents said a monkey could have run

Convention of 1932 was the election

Promises New Deal during campaign

FDR

Battle with Polio Estranged from his wife (should be business

partner)- affair in the twenties Rich, spoiled only child thought he was a

country boy when politically expedient Withdrew inside himself after polio Rehabilitated himself and then political career Likable, Lucky, and Flexible= very skilled

politician Quick with a smile and a good phrase

NEW DEAL

Quick Random Action 1st Fireside Chat- America listened to

FDR Banking Holiday and Emergency

Banking Bill took place right away Banks closed and evaluated Money given to them Try Anything Approach contrasts

greatly with do nothing government that came before

PUT THE PEOPLE BACK TO WORK

CCC- 3 million people WPA- 8 million PWA TVA- renovated poorest part of the

country, gave electricity, forerunner to WWII build up.

15-20% of the country is put to work by the New Deal

MORE THAN JUST JOBS

Provide electricity Conservation Forestry Historical Resources Recreational Resources Major Airports and Highways are created Total National Investment the likes we

have not seen.

DID IT WORK

The New Deal fell short of its overarching purpose- to end or pull the Country out of the Great Depression

New Deal Positives- Gov and Pres Shielded the Country from what could have been a nastier blow and gave us hope and a paycheck when we needed it most. New Deal functioned as the alternative to Dictatorship and the preservation of our way of gov.

For the money FDR and Congress Spent-best we were going to get. Congress conservative Doesn’t like to spend money FDR didn’t have the votes or the cash to do everything he

wanted to

CRITICS

Left says Roosevelt didn’t do enough Social Security is a response to the left Roosevelt’s reforms left out minorities Poor

Right says he became a dictator during the 30’s and abused power and was socialist Hated the spending of Gov funds 1937 cut backs- FDR trying to appease

Conservative democrats and republicans Traitor to his class

FINAL ANALYSIS

New Deal had more supporters than detractors Random action = love from millions and the

idea that this saved them Best end result may be hope and the idea that

FDR and the New Deal did this for the people Negatives of debt spending, eminent domain,

socialist tendencies do not outweigh the positives of hope, jobs, and paychecks for many.