The Great Depression

Study Guide #9

1. What were the causes of the Great Depression?

a. Stock Speculation: People over speculated on stocks, using borrowed money (bought on margin) that they could not repay when stock prices crashed, and the banks demanded payment.

b. Weak Banking System: The Federal Reserve Board failed to prevent the collapse of the banking system. Many people had bought on credit for consumer goods and on margin for stock purchases. These loans could not be repaid.

c. Economic Policies: When President Hoover enacted tariffs on European goods, these same nations enacted retaliatory tariffs on the goods from the United States. High tariffs strangled and discouraged international trade. In addition, President Hoover believed it was not the role of the government to control the economy, and he called on local charities and local governments to help the needy.

d. Overproduction of Goods: Farmers and factories had been producing a surplus for the war. Prices for farm products fell so low that it cost farmers more to grow crops than they could make selling them. Also, the markets were flooded with consumer goods that Americans could no longer afford.

e. Decline in the Farming Industry: Farmers could no longer repay loans because overproduction caused the prices for farm products to fall. In addition, farming techniques no longer supported farming in much of the southern Great Plains. The grasses that had held the soil together had been "busted" up in order to plant wheat. When the years of drought occurred, the soil could not hold up against the powerful dust storms that moved thousands of acres of topsoil hundreds of miles away. This area was nicknamed the Dust Bowl, and thousands of farm families were forced off their farms for good.

2. How were Americans impacted by the Great Depression?

a. A large number of banks and businesses failed.

b. One-fourth of workers were without jobs.

c. Large numbers of people were hungry and homeless. They lived in makeshift communities called "Hoovervilles".

d. Farmers' incomes fell to low levels, and many left their farms for good. This sector of the economy was the hardest hit.

3. What were the major features of the New Deal?

President Roosevelt won in a landslide election. He used government programs to help the nation recover from the Great Depression in his "New Deal for Americans". He said,

"The only thing we have to fear is fear itself..."

The New Deal included these programs:

a. Federal Work Programs:

CCC (Civilian Conservation Corps: provided jobs to young men to plant trees and build bridges)

PWA (Public Works Administration: built ports, schools, and aircraft carriers.)

WPA (Works Progress Administration: built hospitals, schools, parks, airports, and employed artists, writers, musicians.)

b. Environmental Improvement Programs:

TVA (Tennessee Valley Authority: built dams to provide cheap electric power to southern states.)

c. Farm Assistance Programs:

AAA (Agricultural Adjustment Administration: paid farmers not to grow crops.)

d. Increased Rights for Labor:

NRA (National Recovery Act: helped set standards for production, prices and wages.)

e. Safety Net:

SSA (Social Security Act: set up a system of pensions for elderly, unemployed, and people with disabilities.)

f. Banking Safety:

FDIC (Federal Deposit Insurance Corporation: insured savings accounts in banks.)