4.2 The Great Depression
Learning Target 20a: Describe how the federal government’s monetary policies, stock market speculation and increasing consumer debt led to the Great Depression.
Learning Target 20b: how the efforts to combat the Great Depression led to an expanded role for the federal government.
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The economic boom of the Roaring Twenties was followed by an economic bust in the 1930s. This period of severe economic decline was called the Great Depression. The Great Depression was caused, in part, by the federal government’s monetary policies, stock market speculation and increasing consumer debt.
The excessive amount of lending by banks was one of several factors leading to the Great Depression in the United States. This led to stock market speculation and use of credit. The Federal Reserve attempted to control these practices by constricting (limiting) the money supply. This made economic conditions worse because it was harder for people to repay debts and for businesses, including banks, to continue operations.
Another factor leading to the Depression was stock market speculation. Many investors were buying on margin with the hope of making huge profits. In buying on margin, individuals took out loans for as much as 90 percent of the stock price. This became problematic when stock prices fell, and banks could not recoup their loans. The collapse of the stock market in 1929 led many to lose their investments and fortunes.
In the 1920s, more goods were being produced than most people could afford to buy. As a result, factories closed, workers lost needed income, and consumer debt increased.
In 1932, Franklin D. Roosevelt was elected President. His plan for addressing the problems of the Great Depression was called the New Deal. The role of the federal government was greatly expanded with the New Deal. The National Recovery Administration (NRA) was designed to help the economy recover by supervising fair trade codes and guaranteeing laborers a right to collective bargaining. The Works Progress Administration (WPA) and Civilization Conservation Corps provided relief to the unemployed by creating jobs. Other programs introduced reforms for the protection of the elderly, farmers, investors, and laborers.
The excessive amount of lending by banks was one of several factors leading to the Great Depression in the United States. This led to stock market speculation and use of credit. The Federal Reserve attempted to control these practices by constricting (limiting) the money supply. This made economic conditions worse because it was harder for people to repay debts and for businesses, including banks, to continue operations.
Another factor leading to the Depression was stock market speculation. Many investors were buying on margin with the hope of making huge profits. In buying on margin, individuals took out loans for as much as 90 percent of the stock price. This became problematic when stock prices fell, and banks could not recoup their loans. The collapse of the stock market in 1929 led many to lose their investments and fortunes.
In the 1920s, more goods were being produced than most people could afford to buy. As a result, factories closed, workers lost needed income, and consumer debt increased.
In 1932, Franklin D. Roosevelt was elected President. His plan for addressing the problems of the Great Depression was called the New Deal. The role of the federal government was greatly expanded with the New Deal. The National Recovery Administration (NRA) was designed to help the economy recover by supervising fair trade codes and guaranteeing laborers a right to collective bargaining. The Works Progress Administration (WPA) and Civilization Conservation Corps provided relief to the unemployed by creating jobs. Other programs introduced reforms for the protection of the elderly, farmers, investors, and laborers.
