Briana Algarin's List: The Stock Market Crash

• President Franklin D. Roosevelt (D, 1933-45) had launched the "New Deal" to regulate the economy, improve Americans' financial well-being and help lift the nation out of the Great Depression in which it was then mired.

  • However, the effects of buying stocks on margin were far reaching and required for President Franklin D. Roosevelt to invent an economic plan called the "New Deal". Its purpose was to hopefully revitalize the US economy by monitoring the economy.
• not everyone benefited from the renewed prosperity. More than a fifth of the population was living in poverty, which was then defined as having an income of less than $3,000 a year for a family of four
• The stock market crashed in 1929, contributing to the onset of the Great Depression of the 1930s. President Herbert Hoover (R, 1929-33) claimed that the downturn was only temporary, and did not attempt to intervene in the economy.

  • Referring to the Roaring Twenties and the Black Tuesday when people freaked out. Also hints at who was in power and President Hoover's ideology.
• Roosevelt, took an active role in attempting to lead it to recovery. Roosevelt's New Deal was intended to regulate and revive the economy, create jobs and provide assistance for the poor, including unemployment compensation and Social Security for older Americans. In establishing the New Deal, Roosevelt set a precedent for large-scale federal intervention in the economy.

  • Kauffman, Jill. “Great Society and the War on Poverty.” Issues & Controversies in American History. Infobase Publishing, 12 Aug. 2008. Web. 11 Mar. 2013

  • Unlike president Hoover, Roosevelt "took an active role" (Kauffman) in trying to help the economy. He implemented the New Deal, which was supposed to help "regulate the economy, create jobs and provide assistance to the poor" (Kauffman)
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  • • Kauffman, Jill. “Great Society and the War on Poverty.” Issues & Controversies in American History. Infobase Publishing, 12 Aug. 2008. Web. 11 Mar. 2013

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• stock market crash of 1929, President Herbert Hoover (R, 1929-33) tried a number of ways to end the depression, including cutting taxes, initiating large building projects and giving government funds to banks, railroads and insurance companies to prevent their going bankrupt.

  • “President Hoover on the Great Depression.” Issues & Controversies in American History. Infobase Publishing, Web. 10 Mar. 2013

  • The Great Depression was like a cancer, incredibly hard to get rid of no matter what methods President Herbert Hoover used, "including cutting taxes, initiating large building projects and giving government funds to banks, railroads and insurance companies to prevent their going bankrupt." 

• Banks, factories, and shops closed, and farms halted production. Millions of people were left jobless and penniless.

  • The stock market crash impacted more than just banks and civilians; factories and all kinds of shops were also forced to close, leaving millions jobless. 

• The Depression caused a decrease in world trade, as countries tried to help their own industries by increasing restrictions on imports. The impact of the Great Depression varied from country to country.

   

  The Great Depression had significant effects on people's beliefs and on government policies.

  • Reactions to the Great Depression varied from country to country as each nation tries to boost their own economy's by imposing high tariffs on foreign goods. 
• After the war ended, most governments brought back the gold standard in an effort to provide price stability and to halt inflation. However, the return to fixed currency values hurt many countries that had seen prices rise following the war. The return to the gold standard also limited the ability of government leaders to offset declining production and prices by increasing the amount of money in circulation

  • Using your weight in gold to pay for something was not a foreign concept before WW1, but during the war everything changed. Governments started to go away from the 'gold' currency in order to finance the growing debts of war. After the fighting was over, many nations tried to return to the old way of money in order to promote economic stability. 
• During the 1920's, demand for consumer goods and new products such as radios, electrical appliances, and automobiles led to increased production and business profits. Many of these goods were purchased using installment contracts, by which goods are purchased on credit and ownership is transferred after the last payment is made.

  • The flood of cash that was brought on by WW1 caused many consumers to buy new products, like "radios, electrical appliances and automobiles". (Mitchener) This sudden demand caused the production rate of such goods to increase sharply, but there in lay another problem. People were not buying the goods with cash as was expected, they were using 'installment contracts' (Mitchener), which is the equivalent of slowly paying off the price of the item instead of buying it all outright, very similar to buying stocks on margin. 
• From 1925 to 1929, the average price of shares on the New York Stock Exchange more than doubled. Rising share prices encouraged many people to speculate—that is, buy shares in hope of making large profits following future price increases. In 1928 and 1929, the Federal Reserve System—the central banking organization of the United States—raised interest rates in an effort to slow stock market speculation. The higher interest rates led to a reduction in consumer spending and construction spending.
• Share prices dropped rapidly on Thursday, Oct. 24, 1929, now known as Black Thursday. Most share prices remained steady on Friday and Saturday. But the following Monday, share prices fell again. Then, on Tuesday, October 29, shareholders panicked and sold a record 16,410,030 shares. Thousands of people lost huge sums of money as share prices fell about 80 percent. Share prices fluctuated and fell for the next three years.

  • Share prices took several detours from their straight path upwards mere days before Black Tuesday where they plummeted severely. 

  • Share prices wobbled several times mere days before Black Tuesday, when the infamous stock market crash took place. 
• The higher interest rates in the United States helped spread the Depression to other parts of the world. To maintain a fixed exchange rate with the United States, other countries had to raise their interest rates as well. The higher interest rates led to reductions in household and business spending, which in turn led to declines in production.

  • America's attempt to stem the economic decline failed and only aided in spreading the dispair to other nations. 
• Because of falling stock prices, banks and investors lost large sums of money. Banks had also loaned money to many farmers and businesses who were unable to repay it. Bank profits declined, and bank customers worried that their savings were not safe. Many customers withdrew their money from the banks, further straining the health of the banking system. Between January 1930 and March 1933, about 9,000 banks failed. The bank failures wiped out the savings of millions of people.

  • Millions of people's savings were lost when banks closed, which happened quite frequently in the 1930's. The failing stock prices caused everyone, including banks and investors to loose hundreds if not thousands of dollars, which in turn affected the whole community that they belonged to. 
• Bank failures made less money available for loans to industry. The decline in available money caused a drop in production and a further rise in unemployment, and it severely prolonged the Depression.

  • The inability for companies and people to borrow money greatly hurt the economy and those left with outstanding debts.
• In 1925, about 3 percent of the nation's workers were unemployed. The unemployment rate reached about 9 percent in 1930 and about 25 percent—or about 13 million people—in 1933. Many people who kept or found jobs had to take salary cuts. In 1932, wage cuts averaged about 18 percent. Many people, including college graduates, felt lucky to find any job. A popular song of the 1930's called "Brother, Can You Spare a Dime?" expressed the nationwide despair.

  • During the 1930's begging became a popular hobby that once proud American's were forced to do in order to feed their families. However, this usually warranted little, as the Americans that still had jobs had taken huge pay cuts. 
• World trade collapsed during the Great Depression, due in part to the Smoot-Hawley Tariff Act of 1930. This law greatly increased a number of tariffs on a variety of imported goods. President Hoover signed the law because he thought it would reduce competition from foreign products. But other nations soon reacted by raising tariffs on imported goods.

  • The government started to see that their economy's were wobbling and tried to shove more sand into the ever failing pillars, only heightening the rate of destruction for other nations. This extra sand was called a tariff. Governments imposed these tariffs, which are taxes on foreign goods in hopes of encouraging in country production. 
• Declining prices were a serious problem during the Depression, as farmers and businesses received less money for their products and services. From 1929 to 1933, consumer prices fell by about 25 percent and prices of farm goods fell more than 50 percent. Farmers produced a surplus of crops, which pushed prices down because there was more food than people could buy. Falling prices led to rising debt burdens for borrowers and bankruptcy for many farmers. In addition, falling prices caused many consumers to delay purchases because they anticipated that prices would be even lower in the future.

  • Prices for consumer goods dropped acutely in the 1930's greatly affecting industrialists and farmers. On top of this, many Americans would hold their money to buy an object for as long as they could in order to get the cheapest prices possible. 
• Many died of disease resulting from malnutrition. Thousands lost their homes because they could not pay their mortgages. In 1932, at least 25,000 families and more than 200,000 young people wandered through the country seeking food, clothing, shelter, and a job. Many youths traveled in freight trains and lived near train yards in camps called hobo jungles. Some homeless, jobless travelers obtained food from welfare agencies or religious missions in towns along the way. Many travelers became ill because they lacked proper food and clothing.

  • During this time the US lost countless souls to malnutrition, disease and illnesses such as pneumonia. Thousands were homeless, and searching for any kind of relief from the nightmare that had become their reality. The younger of the 'travelers' could travel by freight train in order to use as shelter and move from town to town, but the families were not nearly as lucky. The children usually hindered them from leaving and jumping the tracks, so they were forced to stay in Hoovervilles. 
• Some crowded into the home of a relative. Others moved to a shabby section of town and built shacks from flattened tin cans and old crates. Groups of these shacks were called Hoovervilles, a name that reflected the people's anger and disappointment at President Herbert Hoover's failure to end the Depression.

  • Hoover had not been in power long, in fact he had only come into term in 1929, but he was blamed for everything and the fate of the US economy was on his shoulders. 
• The Depression did not affect all groups equally. In most U.S. cities and in the South, unemployment rates were much higher for African Americans than for whites. Similarly, women often faced greater difficulty finding jobs than men did. The suffering of the Depression also brought heightened discrimination against Mexican Americans. Many people considered them a drain on the economy because they held many low-paying jobs while other Americans went unemployed. During the 1930's, thousands of Mexican Americans were deported against their wishes.

  • Not only did the Great Depression bring on widespread unemployment, it also jump started discrimination. 
• In 1932, many farmers refused to ship their products to market. They hoped a reduced supply of farm products would help raise the price of these goods. Such farmers' strikes occurred throughout the country, but they centered in Iowa and the surrounding states.

  • In a weak attempt to boost food prices, some farmers went on strike to restrict the amount of food in the market and hopefully up the value of crops. 
• Hoover declared that state and local governments should provide relief to the needy. But those governments did not have enough money to do so. In 1932, Congress approved Hoover's most successful measure for fighting the Depression, the Reconstruction Finance Corporation (RFC). This agency provided some relief by lending money to banks, railroads, and other large institutions whose failure would have made the Depression even worse. However, most Americans felt that Hoover did not do enough to fight the Depression, and voters elected Franklin D. Roosevelt president in 1932.

  • Finally when the conflict was becoming too large to ignore, President Hoover stepped in and implemented the Reconstruction Finance Corporation (RFC). "This agency provided some relief by lending money to banks, railroads and other large institutions whose failure would have made the Depression even worse", but it was too little too late and in 1932, Franklin D. Roosevelt was sworn into office. 
• Roosevelt believed the federal government had the chief responsibility of fighting the Depression. He called Congress into a special session, now called the Hundred Days, to pass laws to relieve the Depression. Roosevelt called his program the New Deal.

  • The New Deal was Roosevelt's first attempt to fix the tattered American economy. 
• The laws established by the New Deal had three main purposes. First, they attempted to provide relief for the needy. Second, they sought to aid recovery by providing jobs and by forming partnerships between government, consumers, and businesses. Third, the laws tried to reform business and government so that such a severe depression would never happen again.

  • The New Deal had three goals : 1) "to provide relief for the needy", 2) "to aid recovery by providing jobs and by forming partnerships between government, consumers, and businesses", 3) "laws tried to reform business and government". 
• The New Deal programs helped relieve some of the worst human suffering of the Depression. The government also increased trade by lowering tariffs on certain imported goods. In return, other nations lowered tariffs on some products that they imported from the United States. However, the economy substantially improved only after the United States abandoned the gold standard, devalued the dollar, increased the money supply, and helped the banking system to recover.

  • The New Deal called for many changes to be implemented into the government, including lowering tariffs across the world and abandoning the gold standard. 
• Following the Great Depression, many countries began to provide better welfare benefits for the poor. In the United States, laws of the New Deal gave the government more power to provide money for the needy and the elderly. Since the Depression, both Democratic and Republican administrations in the United States have broadened the powers of the federal government.

  • Mitchener, Kris James. "Great Depression." World Book Student. World Book, 2013. Web. 12 Mar. 2013.

  • As afore stated the Great Depression's effects were long reaching and the repercussions are still appearing today. 

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