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Questions and Answers
What was one of the primary goals of the Civilian Conservation Corps (CCC)?
What was one of the primary goals of the Civilian Conservation Corps (CCC)?
What was a significant outcome of the Agricultural Adjustment Administration (AAA)?
What was a significant outcome of the Agricultural Adjustment Administration (AAA)?
What was the purpose of the Works Progress Administration (WPA)?
What was the purpose of the Works Progress Administration (WPA)?
What did the Social Security Act of 1935 establish?
What did the Social Security Act of 1935 establish?
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Which event was characterized by drought and ecological disaster in the Southern Great Plains during the mid-1930s?
Which event was characterized by drought and ecological disaster in the Southern Great Plains during the mid-1930s?
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What was one significant factor contributing to the stock market crash of 1929?
What was one significant factor contributing to the stock market crash of 1929?
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How did John Raskob suggest individuals could amass wealth in 1929?
How did John Raskob suggest individuals could amass wealth in 1929?
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What was the public reaction to the stock market crash on October 29, 1929, commonly referred to as 'Black Tuesday'?
What was the public reaction to the stock market crash on October 29, 1929, commonly referred to as 'Black Tuesday'?
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What was Franklin Delano Roosevelt's response to the economic crisis as he took office in 1933?
What was Franklin Delano Roosevelt's response to the economic crisis as he took office in 1933?
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Which statement reflects Hoover's approach to the Great Depression?
Which statement reflects Hoover's approach to the Great Depression?
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What was the impact of buying on margin during the stock market boom of the late 1920s?
What was the impact of buying on margin during the stock market boom of the late 1920s?
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During the Great Depression, what social pressures did women face in the workforce?
During the Great Depression, what social pressures did women face in the workforce?
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What was a major consequence of the stock market crash on the banking system?
What was a major consequence of the stock market crash on the banking system?
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How did manufacturers respond to declining consumer demand during the Great Depression?
How did manufacturers respond to declining consumer demand during the Great Depression?
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What did FDR communicate to the American public during his fireside chats?
What did FDR communicate to the American public during his fireside chats?
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Study Notes
Stock Trading in the Late 1920s
- Stock trading in the late 1920s captured the public's imagination.
- The stock market was likened to sports, with stock prices following the performance of popular athletes like Babe Ruth.
- Business leaders and economists urged Americans to invest in stocks, creating a sense of duty.
John Raskob's Influence
- John Raskob, a Dupont and General Motors executive, published an article in Ladies' Home Journal in 1929 advising readers on wealth creation.
- His article promoted investing in stocks as a guaranteed path to wealth.
- He suggested saving $15 per month and investing in stocks to accumulate $80,000 in 20 years.
Buying on Margin
- New approaches to buying stocks contributed to an optimistic atmosphere on Wall Street.
- Easy credit allowed investors to buy stocks with small down payments (often 10%) and borrow the rest from brokers.
- This practice, known as buying on margin, amplified market fluctuations.
- Brokerages held shares as collateral.
Bull Market of 1928
- The stock market experienced a period of strong growth in 1928.
- Radio Corporation of America (RCA) stock rose from 85 points to 420, and Chrysler stock from 63 points to 132 points.
- The majority of Americans, however, did not own stock (around 4 million out of 120 million).
The Stock Market Crash
- The stock market crash is often depicted as a single-day catastrophe on Wall Street, but it was a gradual downward slide.
- The market peaked in September 1929, and prices began drifting downward.
- On October 29, 1929, also known as Black Tuesday, 16 million shares traded with panic selling.
- No buyers existed for many stocks.
Underlying Economic Weaknesses
- Simplification of the crash as a single event obscures deeper economic problems.
- Workers and consumers received a small share of increased productivity gains, leading to overproduction and a lack of purchasing power for consumers.
- The agricultural sector failed to regain post-World War I prosperity and faced falling prices, export losses, and incurred wartime debts.
- Income and wealth were unevenly distributed in the US. The top 0.1% of the population controlled a significant portion of income.
Impact of the Crash
- Manufacturers decreased production and laid off workers.
- Layoffs further reduced consumer spending and prompted more production cuts.
- Banks failed as depositors withdrew their uninsured funds.
- Unemployment soared (reaching 1/3), with little government assistance available.
- The crash undermined individual confidence and investment, causing a widespread decline in spending among businesses and wealthy individuals.
Socioeconomic Implications
- The economic downturn caused individuals to blame themselves for their misfortunes and feel shame and guilt due to their perceived inadequacies.
- Women, despite being cheaper labor, were relegated to lower-paying jobs like clerks, secretaries, maids, or waitresses—earning less than factory workers.
- Men, having lost status within the family, experienced increased stress and distress.
Herbert Hoover's Presidency Response
- Hoover, the US Secretary of Commerce, resisted calls for government intervention.
- He believed that federal relief efforts would undermine individual initiative and self-reliance.
- Despite resisting direct action, Hoover did create a plan to restore business confidence. The plan aimed to stimulate the economy by strengthening banks, railroads, and insurance corporations.
Bonus Army March
- Congress passed a $1,000 bonus for World War I veterans, due in 1945.
- In 1932, veterans (forming the Bonus Army) demanded early payment, and they camped outside Washington D.C.
- Their encampment was forcefully dispersed by the military.
Franklin D. Roosevelt's Presidency
- Roosevelt, a Democratic governor of New York, faced the challenge of a 25% unemployment rate.
- The Democratic party won a landslide victory in the 1932 election.
Roosevelt's Early Actions
- Roosevelt assembled key advisors ("brain trust") in Washington D.C to formulate the New Deal.
- Key figures included Harry Hopkins (Secretary of Commerce) and Frances Perkins (Secretary of Labor).
- The first 100 days of Roosevelt's presidency focused on addressing the financial crisis and creating employment opportunities. FDR reassured Americans during a time of fear.
Fireside Chats
- Roosevelt used radio addresses, known as fireside chats, to explain government actions and restore public confidence in the banks.
100 Days Actions
- During the first 100 days, Roosevelt implemented various emergency programs and acts to combat the Depression.
- This period is known as the New Deal, and involved federal government action to address economic issues.
- His administration faced opposition from Congress and business interests who felt their initiatives had been infringed.
New Deal Programs
-
Civilian Conservation Corps (CCC): Relief program for young men involved in conservation projects. -Road construction and reforestation -Flood control and national park improvements.
-
Agricultural Adjustment Administration (AAA): Relief effort for farmers.
- Federal role in setting farm prices and production
-
Public Works Administration (PWA): Infrastructure development. -$3.3 billion spent on roads and public buildings (schools, post offices, bridges, courthouses).
Second 100 Days
- Roosevelt shifted the focus toward social reforms and job creation.
- Security against financial crisis, unemployment, and illness.
- Improvements in housing and urban slums.
Social Security Act
- In 1935, the Social Security Act mandated payroll tax contributions for workers and employers to fund retirement benefits for those over the age of 65
Works Progress Administration (WPA):
- Public Works Administration
- Federal government projects to stimulate the economy
- Public building projects
- Roads
- Schools
- Parks
Dust Bowl
- Occurred during the mid-1930s
- Ecological and economic disaster in the Southern Great Plains (Kansas, East Colorado, Oklahoma, Panhandle of Texas, eastern New Mexico).
- Persistent drought and harsh weather conditions exposed the soil, leading to dust storms and agricultural devastation.
- Overproduction of crops during WWI contributing factor.
Wagner Act
- FDR implemented measures for worker rights:
- Guarantees for workers to form unions and collectively bargain for wages and working conditions.
- Prohibits anti-union practices, such as firing employees for union activity.
National Housing Act
- Implemented in 1937.
- Housing construction
- Clearance efforts to eradicate urban slums
- Rent subsidies for low-income families
New Deal Conclusion
- The New Deal (1933-1941) did not transform property rights nor fundamentally alter the distribution of wealth.
- It partially failed to address the economic hardships faced by many groups, like migrant workers, tenant farmers, and minorities.
- It created a new political coalition comprising workers, minority groups, and intellectuals.
Lasting Impact
- The federal government's expanded role in the economy intensified during and after WWII.
- Expectations for increased government involvement in social welfare continued after the New Deal.
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Description
This quiz explores the dynamics of stock trading in the late 1920s, focusing on the impact of cultural figures and financial strategies on public investment. Delve into John Raskob's influential advice on wealth creation and the emergence of buying on margin as a popular investment tactic. Test your knowledge of this pivotal era in American financial history.
