Lesson 6 Great Depression

Warm Up: How did the Roaring 20’s lead to the development in the 1930’s.

The Roaring 20’s led to the Hoovervilles because the excess spending by consumers and unstable American economy caused the stock market to crash and banks to fail. As a result, people couldn’t get money to buy houses are living areas.

Causes of the Hoovervilles

• Consumerism and credit (People spent money they didn’t have)
• Illegal alcohol
• Unstable mortgages

Warren G. Harding (1921-1923)

• “A return to normalcy”
  • Believed in cutting government waste
  • Pro-Business
  • Teapot Dome Scandal
    • Members of his administration take bribes and made illegal business deals

Calvin Coolidge (1923-1929)

• Laissez Faire
  • Business would do better if the government left it alone
• Rugged individualist
• Did not waiver on making Europe repay war loans
• Strict Isolationism
  • Never get involved in the affairs of other nations unless it is self-defense

From 1929 to 1933, unemployment increases and GDP decreases.

Causes of the Great Depression

• Overproduction
  • The “Roaring 20’s” was an era of great prosperity and economic growth
  • 1929: Agriculture still makes up half of the US economy
  • A surplus of goods in the market begins to drive prices down
• Failed Monetary System
  • By 1929, the federal government decided to slow the rapid growth by increasing interest rates during a recession
    • Raising interest rates means that it cost more to borrow and raises the price of existing debt
• Stock Market
  • The value of stocks soared in the 1920’s as corporate profits rose, fueled by mass consumption (Fueled by credit)
  • Black Tuesday, October 29th 1929

Hoover is blamed for the Great Depression

• Government shouldn’t play an active role in the economy
• Bankers/Business to follow policy of voluntary non-coercive cooperation where he gave tax breaks in return for private sector economic investment
• Hoover Moratorium: put a temporary stop to war debt and reparation payments
• Democrats in Congress passed a high tariff (Smoot-Hawley Tariff Act) to protect US industry (hoped to stimulate purchasing of US goods)