The Great Depression

1. Effects

1.1. Recovery in the rest of the world varied greatly.

1.2. The British economy stopped declining soon after Great Britain abandoned the gold standard in September 1931

1.3. The economies of a number of Latin American countries began to strengthen in late 1931 and early 1932.

1.4. Germany and Japan both began to recover in the fall of 1932. Canada and many smaller European countries started to revive at about the same time as the United States, early in 1933.

1.5. France, which experienced severe depression later than most countries, did not firmly enter the recovery phase until 1938.

2. Definition

2.1. The Great Depression, which began in the United States in 1929 and spread worldwide

2.1.1. Was the longest and most severe economic downturn in modern history

2.2. It was marked by steep declines in industrial production and in prices (deflation), mass unemployment, banking panics, and sharp increases in rates of poverty and homelessness.

3. Facts

3.1. The Great Depression was a worldwide economic depression that lasted 10 years.

3.2. It began on “Black Thursday," October 24, 1929.

3.3. Over the next four days, stock prices fell 23 percent in the stock market crash of 1929.

3.4. The U.S. has experienced significant economic downturns since, nothing has matched the severity or duration of the Great Depression.

4. What Ended the Great Depression

4.1. In 1932, the country elected Franklin D. Roosevelt as president.

4.1.1. He promised to create federal government programs to end the Great Depression.

4.1.2. Within 100 days, he signed the New Deal into law, creating 42 new agencies

4.1.3. They were designed to create jobs, allow unionization, and provide unemployment insurance.

4.1.3.1. Many of these programs still exist.

4.2. Many argue that World War II, not the New Deal, ended the Depression.

4.2.1. Others contend that if FDR had spent as much on the New Deal as he did during the War, it would have ended the Depression.

4.2.2. In the nine years between the launch of the New Deal and the attack on Pearl Harbor, FDR increased the debt by $3 billion.

4.2.3. In 1942, defense spending added $23 billion to the debt.

4.2.4. In 1943, it added another $64 billion.

4.3. The Great Depression was technically over by 1933

4.3.1. The economies had started to recover

4.3.2. Most did not experience full recovery until the late 1930s or early 1940s

4.4. The United States is generally thought to have fully recovered from the Great Depression by about 1939.

5. Causes

5.1. Stock Market Crash of 1929

5.1.1. Workers flood the streets in a panic following the Black Tuesday stock market crash on Wall Street, New York City, 1929

5.1.2. Shattered confidence in the American economy

5.1.3. Remembered today as "Black Tuesday"

5.1.3.1. The stock market crash of October 29, 1929

5.1.4. Losing 12 percent of its value and wiping out $14 billion of investments

5.1.4.1. By two months later, stockholders had lost more than $40 billion dollars.

5.1.5. Even though the stock market regained some of its losses by the end of 1930, the economy was devastated.

5.1.6. As consumer confidence vanished in the wake of the stock market crash

5.1.6.1. The downturn in spending and investment led factories and other businesses to slow down production and begin firing their workers.

5.1.7. Many Americans forced to buy on credit fell into debt

5.1.7.1. The number of foreclosures and repossessions climbed steadily

5.1.8. The global adherence to the gold standard, which joined countries around the world in a fixed currency exchange, helped spread economic woes from the United States throughout the world.

5.1.8.1. Especially Europe.

5.2. Bank Failures

5.2.1. A crowd of depositors outside the American Union Bank in New York, having failed to withdraw their savings before the bank collapsed, 30th June 1931.

5.2.2. Nearly 700 banks failed in waning months of 1929 and more than 3,000 collapsed in 1930.

5.2.3. Federal deposit insurance was as-yet unheard of, so when the banks failed, people lost all their money.

5.2.4. By the end of the decade, more than 9,000 banks had failed.

5.2.4.1. Surviving institutions, unsure of the economic situation and concerned for their own survival, became unwilling to lend money.

5.2.4.1.1. Leading to less and less spending.

5.3. Reduction in Purchasing Across the Board

5.3.1. With their investments worthless, their savings diminished or depleted, and credit tight to nonexistent, spending by consumers and companies alike ground to a standstill.

5.3.1.1. Workers were laid off en masse

5.3.1.2. The unemployment rate rose above 25 percent, which meant even less spending to help alleviate the economic situation.

5.3.1.2.1. The country’s industrial production had dropped by half. Bread lines, soup kitchens and rising numbers of homeless people became more and more common in America’s towns and cities.

5.4. American Economic Policy With Europe

5.4.1. D. Baker Rails Against the Hawley-Smoot Tariff.

5.4.2. Vowing to protect U.S. industry from overseas competitors, Congress passed the Tariff Act of 1930, better known as the Smoot-Hawley Tariff.

5.4.2.1. The measure imposed near-record tax rates on a wide range of imported goods

5.4.2.2. A number of American trading partners retaliated by imposing tariffs on U.S.-made goods.

5.4.3. As a result, world trade fell by two-thirds between 1929 and 1934.

5.4.3.1. In 1932 with the country mired in the depths of the Great Depression and some 15 million people (more than 20 percent of the U.S. population) unemployed, Democrat Franklin D. Roosevelt won an overwhelming victory in the presidential election.

5.4.3.1.1. Franklin Roosevelt and a Democrat-controlled Congress passed new legislation allowing the president to negotiate significantly lower tariff rates with other nations.

5.5. Drought Conditions

5.5.1. The economic devastation of the Great Depression was made worse by environmental destruction.

5.5.1.1. A years-long drought coupled with farming practices which did not use soil-preservation techniques created a vast region from southeast Colorado to the Texas panhandle that came to be called the Dust Bowl.

5.5.1.2. Massive dust storms choked towns, killing crops and livestock, sickening people and causing untold millions in damage.

5.5.1.2.1. Thousands fled the region as the economy collapsed

5.5.1.2.2. It would be years, if not decades, before the region's environment recovered.