The Beginnings Of The Great Depression And The New Deal
The Beginnings of the Great Depression
The stock market crash of October 1929 marked the beginning of the worst depression in American history, from which the country did not really begin to rebound until the start of World War II. The human toll of the economic collapse is difficult to calculate. By 1933, more than 13 million Americans were out of work, tens of thousands of business had failed, and the number of farm foreclosures grew. The problems of agriculture were made worse by several years of drought that turned a good part of the Great Plains into a dust bowl and triggered an internal migration of destitute farmers to California. Blamed for the Depression, the Republicans lost control of both Congress and the White House for almost two decades. Elected in a landslide in 1932 for the first of his four terms, Franklin Roosevelt tried to bring the country out of the Depression through a combination of deficit spending and federal programs known as the New Deal.
Even before the stock market crash, there were signs that the prosperity of the 1920s was on shaky ground. As early as 1927, business inventories began to rise as consumer spending declined. The Federal Reserve Board tried to curb speculation by raising interest rates in July 1928, but the banks continued to make questionable loans. Agriculture had been depressed since the end of World War I, and both industrial production and the employment level dipped in mid 1929. The warning signs were there but went largely unheeded by the government and public alike.
The stock market crash. Stocks were bought on credit like many other commodities in the '20s. Millions of investors paid as little as 25 percent of the face value of a stock, and paid off the balance when the stock was sold after the price went up. This practice of buying on margin contributed to the rampant speculation in the market. Americans who had no knowledge of what to do in the market put their money in “investment trusts,” a...
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