Great Depression and Direct Gov’t Action Essay

Submitted By MONKEYFUNRUN
Words: 1590
Pages: 7

Ch.24: The Great Depression & the New Era & the New Deal
-In 1933 after having the worse economic depression in US history, the American people were gripped by fear for their very survival.
-depression of 1930s lasted longer and caused more business failures.
-affected both middle and working classes.
-before it was over, Hoover & Roosevelt would devote 12yrs seeking the elusive path toward recovery.
CAUSES AND EFFECTS OF THE DEPRESSION (1929-1933)
-business boom 1920s collapse in October of 1929.
Wall Street Clash:
-stock prices kept increasing for 18 mnths.
-The Dow James Industrial Average of major stocks reached an all time high of 381.
-a investor who bought stocks at the time of Hoovers election would have doubled their money in less than a year.
Black Thursday and Black Tuesday:-on Black Thursday there was an unprecedented volume of selling on Wall Street and stock prices plunged.
-from October 29 and on, prices continued to decrease & by November, Dow Jones index fell from September high of 381 to 198.

Causes of the Crash:
-the depression was a result of a combination of factors that happened during the 1920s.
Uneven distribution of income:
-economic success wasn’t shared by all.
Stock market speculation:
-ppl no longer invested their $ to share profits.
-speculating the price of a stock would go ^ & they could sell it for profit.
-Buying on margin allowed ppl to borrow most of the cost of the stock.
-when stock prices dropped, market collapsed & they lost everything they borrowed & invested.
Excessive use of credit:
-advertising stimulated consumers’ desire for the exciting new appliances and cars that were being produced.
Overproduction of consumer goods:
-Business growth produced a volume of goods that workers with stagnant wages could not continue to purchase.
Weak farm economy:
-prosperity of 1920s never reached farmers who suffered from over production, high debts & low prices since the end of WWI.
-1930s was severe weather which added to farmers difficulties.
Government policies:
-Congress enacted high tariffs which protected the US industries but hurt farmers and international trade.
-neglect & bad practices would prove difficult for the gov’t to correct.
Global economic problems:
-Europe didn’t completely recovered from WWI but US failed to recognize Europe’s problems.
-war reparations burdened Germany throughout the 1920s.
-some relief came w/ US loans under the Dawes Plan but the loans were suspended.
Effects:
-Great Depression’s influence on American thinking and policies has even extended beyond the lifetimes of those who experienced.
-economic statistics serve as indicators that track the health of a nation’s economy.
-The US Gross National Product dropped whiles the nation’s income declined by over 50%.
-by 1933, unemployment had reached 13million ppl or 255 of workforce not including farmers.
-the power of fed. Gov’t would increase greatly as the people accepted dramatic, far-reaching changing in policies.
-social effects were poverty and homelessness increased , mortgage foreclosures and evictions became commonplace.
Hoover’s Policies:
-Hoover believed that the nation could get through difficult times if ppl took his advice about exercising voluntary action & restraint.
-Hoover hesitated to ask Congress for legislative action on the economy afraid that gov’t assistance to individuals would destroy their self-reliance.
-need for more direct gov’t action, he took the traditional view that public relief should come frm state & local gov’ts not the fed. Gov’t
Responding to a Worldwide DEPRESSION:
-through the Dawes Plan for the repayment of war debts, European prosperity was closely tied to that of the US.
Hawley-Smoot Tariff (1930):
-passed by the Rep. Congress set tax increases ranging from 31% to 49% on foreign imports.
-political purpose was to satisfy US business leaders who thought a higher…