...[A] host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.Franklin Roosevelt, March 1933
B. Lack of diversification in American economy--prosperity of 1920s largely a result of expansion of construction and automobile industries
C. Poor distribution of purchasing power among consumers
2. Farm income declined 66% from 1920 to 1929
3. By 1929 the top 10% of the nation's population received 40% of the nation's disposable income
2. Many bankers had small reserves as they attempted to capitalize on stock market growth.
3. Low margins encouraged speculative investment on the part of banks, corporations, and individual investors
2. Some nations, particularly Germany, were so beset by financial crises and inflation that they could not afford to purchase American goods
3. Unable to pay wartime debts, many European nations borrowed from American banks, further increasing indebtedness
4. High American protective tariffs discouraged trade
B. Stock prices began to fall in September 1929. On October 24 (Black Thursday) and October 29 (Black Tuesday), prices fell drastically as sellers panicked. By December $40 billion in stock value had been lost.
C. Hoover and business leaders attempted to calm Americans by assuring them that the country's economy was fundamentally sound
D. J.P. Morgan and other bankers bought $20 million of U.S. Steel to try to restore confidence
E. Economic downturn accelerated by market crash
2. Corporate profits fell from $10 billion to $1 billon
3. Between 1929 and 1933, over 6000 banks failed with over 9 million savings accounts lost ($2.5 billion)
4. By 1933, 13 million workers were unemployed (25% of the work force) and many were underemployed
5. Malnutrition increased, as did tuberculosis, typhoid and dysentery.
6. Large numbers of homeless workers roamed the U.S., particularly the Southwest, seeking work
III. Hoover's Response
B. Urged Americans to turn to community and church resources (Salvation Army, Community Chest, Red Cross) to meet needs of the poor
C. Gradually used federal agencies to address issues
2. Financed federal work projects, such as massive dams in the West (Boulder, Hoover, and Grand Coulee)
3. Set up RFC (Reconstruction Finance Corporation) in 1932 to make loans to stimulate economy in a "trickle-down" manner
4. Raised tariffs 33% by signing the Hawley-Smoot Tariff in attempt to keep foreign goods off the U.S. market.
2. Accused FDR of seeking the destruction of capitalism
2. Campaign slogan: "Happy Days are Here Again" signalled Democratic optimism in face of economic problems
D. FDR won 57% of the popular vote and Democrats took control of both the House and Senate
E. Following long lame-duck period for Hoover and Republicans (November 1932-March 1933), FDR launched Hundred Days of legislative and administrative changes
See New Deal chart for specific programs.
Feldmeth, Greg D. "U.S. History Resources"
http://home.earthlink.net/~gfeldmeth/USHistory.html (31 March 1998).
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