Professor Kris Teters
Survey of US History
12 September 2018
C121 Task Four
A. Major causes of the Great Depression
Banking Practices-Many businesses applied for loans and were less than honest about their ability to return the funds. These techniques were overlooked by lending agencies, putting banks in a predicament. Individuals and banks also invested with a tiny portion of a stock’s price and then used these under-paid stocks as collateral for other stock-related purchases. When stock prices stopped rising, investors tried to sell extremely low to make back what they put in. Because so many were trying to sell low at the same time, prices plunged. So, brokers demanded full payment for stocks bought on margin. Because nobody had actual collateral to pay, banks and investment companies drowned under the Stock Market Crash (Norton, 2015).
International Commerce-For World War I and later, Americans loaned billions to nations in Europe. By the late 1920’s, American investors decided to keep their money in local stock markets. Europe couldn’t borrow more, and they couldn’t even sell goods in our market because the tariffs were too high. This caused them to buy less from the US. The Allied nations depended on German war reparations to pay their debts to the United States, and the German government depended on American bank loans to pay back those loans. When the crash put a halt on American loans, the western economy went with it. As the economy in America declined and foreign loans remained unpaid, Johnson Act passed in 1934, forbidding government loans to foreign governments in default to the United States (Norton, 2015).
B. Addressing the problems of the Great Depression with the New Deal
B1. Unemployment-As unemployment climbed, Hoover created the President’s Organization on Unemployment Relief to collect money to aid destitute families. This proved to be unsuccessful, as banks and organizations soon closed their doors to donating. Another New Deal program that emphasized work relief was the Federal Emergency Relief Administration. At the beginning of 1934, the Civil Works Administration had hired millions of people. And the Civilian Conservation Corps. paid unmarried young men to do hard outdoor labor, while having Native Americans working on Indian reservations. As time grew, the unemployment rate did lower, but 9 million people were still unemployed, and many Americans went on strike and many started to fight for gender employment equality (Norton, 2015).
B2. The banking crisis-In the first month of 1932, the Hoover administration took its most forceful action, creating the Reconstruction Finance Corporation to provide federal loans to insurance companies and railroads, hoping to revive said industries and regain investment in the economy. Hoover was only mildly successful with his endeavor, so Roosevelt generated a new way to fight the financial turmoil. Immediately after inauguration, Roosevelt closed banks for a four-...