Eric Rauchway

·        1932 – US unemployment was up to 25%.

·        Roosevelt gave a speech about a ‘new deal’ for the American people. This involved increasing public works, creating new mortgage markets, restoring international trade, social insurance against old age, unemployment and disability, and support for unionization.

·        Great Depression began in the late 1920s, and was strengthened by the Crash of 1929.

·        Crisis worsened appallingly under Hoover’s administration.

·        The New Deal emerged over time from the fights between the president, the Congress, the Supreme Court, all of them influenced by the electoral reforms. Had methods of pragmatic experimentation and shifting power away from states.

·        Countervailing power became a distinctive hallmark of the New Deal. It gave weaker groups in society the ability to negotiate better deals in a market place it left substantially intact.

·        The New Deal did not end the Great Depression. Unemployment did not return to its 1929 level until 1943. Throughout the 1930s, (apart from 1937-38), the economy was improving, growing by approximately 8% a year.

·        Anglo-American trade agreement in 1938 pointed towards an international method of reviving the world economy.

·        WWI made it harder for people, goods and money to move around the globe, and it shifted the direction in which they flowed too.

·        John Maynard Keynes forecast what lay in wait for the industrial world; ‘depression of the standard of life of the European populations to a point which will mean actual starvation for some’.

·        Before 1914, people, goods and capital crossed national borders with relative ease. They therefore had the greatest possible scope to seek a place where their work would yield the most profit. This movement across borders meant the export of excess from industrial Europe.

·        International trade moved with relative freedom, especially compared to the 1920s, and Britain led in the promotion of lower tariffs.

·        The war shut down this system – people and goods could no longer move freely, and their formerly productive power went towards destruction. Capital funded the war’s western front instead of the New World frontier.

·        Once war ended, the peace did nothing to restore the old world order – the Treaty of 1919 includes no provisions for the economic rehabilitation of Europe - Keynes argued.

·        After war America made it extremely hard for immigrants to enter. This made it harder for Europeans to find opportunities abroad.

·        With the war the US had shifted from the world’s debtor to the world’s great creditor. New York replaced London as the central lender in the world’s credit network.

·        The new global system of the 1920s was less open and flexible, and relied on continued American lending to fund deficits and debts around the war-impoverished world.

·        1921 – America’s optimism grew – people could live materially better off, they thought they had entered a new era of prosperity. So securely did they hold this belief that they accepted new offers of credit in order to buy what they could not afford.

·        The major luxury was cars. By 1929 the 4.4 million cars they had produced were the single most valuable chunk of their manufacturing output.

·        Once every American family had a car, GM (General Motors) was worried about who would continue to by cars. Therefore, they annually changed their models, and to make them affordable, began extending credit through the General Motors Acceptance Corporation.

·        Instalment plans sent bills regularly, yet pay checks were not sent with equal reliability. Cyclical unemployment always loomed. Consumers became more uncertain before purchasing products. Any hesitation in spending in an economic crisis could slow or stop the nation’s assembly lines.

·        1928 –The use of stock pools caused an increase in trading on the exchanges and in the borrowing to trade on the exchanges. The Federal Reserve thus decided to make it more expensive to borrow money. It therefore began withdrawing funds from the money market.

·        Federal Reserve’s tighter monetary policy helped slow American capital going to foreign countries.

·        Around the world too many people had borrowed too much money for unproductive purposes and had no way of paying it back. Countries like Germany relying on American loans started to fall into trouble. Too few reliable investments remained.

·        Black Thursday, October 24^th. Stock market continued to drop.

·        In 1930 spending on consumer durables fell by 20%. Consumer confidence was at an all time low. Factories and banks closed down. Unemployment doubled its 1929 level.

·        Herbert Hoover was blamed for the structure of global finance after WWI, yet he blamed WWI for being the primary cause of the Great Depression.

·        Although he set about with aims and requests to help ease the depression, none of his attempts worked. E.g. negotiating with employers not to cut wage rates, which they agreed not to do. However, they then went and reduced working hours and laid workers off, managing to save money whilst still upholding the agreement with Hoover.

·        Even in 1929, Hoover still referred to the ‘magnificent Federal Reserve system’ and the ‘sound condition of banks’.

·        June 17^th, 1930 – Hoover signs the Smoot-Hawley Tariff into law, raising tariffs on imports into America. Idea was to protect American farmers from competition from abroad.

·        In the years that followed, other countries followed suite, and increased tariff barriers. This meant that world trade fell by one quarter of its volume. Cutting down trade meant cutting down the international flow of borrowed money.

·        States that allowed branch banking had stronger more competitive banks that drove out or absorbed weaker banks. The Canadian banking system, with extensive branch banking, survived the depression largely intact.

·        Banks suffered because their clients suffered and could no longer pay off loans or make new deposits in their savings accounts. Banks incomes dried up and they could not pay their own creditors. This led to some banks shutting down.

·        Hoover would not open the federal treasury for relief until after private and local public institutions collapsed. He was against federal action and believed civic, non governmental action should lead the way.

·        Two main pieces of legislation helped loosen restrictions on credit and got bankers and business men to lend and borrow money more freely again – which may have helped reemployment levels. Firstly, in January 1932, Hoover signed the Reconstruction Finance Corporation (RFC) which acted as an energetic lender of last resort to rescue the nation’s credit providing institutions. Secondly, Hoover signed a bill allocating $125 million to the Federal Land Bank system, a network of banks established in 1916 to provide farm mortgages. The extra money would prop up the banks in the face of defaulting borrowers and savers who demanded their deposits.

·        The Depression put the middle class more and more into the circumstances of the poor and encouraged empathy across class lines. The gap between income brackets shrank.

·        1932 – 11.5 million Americans, a quarter of the work force, were out of work. This meant something like 30 million people had lost their source of income.