11.6.2- Understand the explanations of the principal causes of the Great Depression and the steps taken by the Federal Reserve,
Congress, and Presidents Herbert Hoover and Pranklin Delano Roosevelt to combat the economic crisis,
FARMERS NEED A LIFT: Perhaps agriculture suffered the most. During World War 1, prices rose and
international demand for crops such as wheat and corn soared. Farmers had,
more and
taken out
after the war, and crop prices
for land and equipment. However, demand,
by 40 percent or more.
Farmers boosted production in the hopes of
more crops, but this only depressed
declined from $10 billion to
Many
and seized the property as payment for the debt. As
banks began to fail. Auctions were held to
further. Between 1919 and 1921 annual farm,
just over $4 billion. Farmers who had gone into debt had difficulty in paying off their
lost their farms when banks
farmers began to default on their loans, many,
recoup some of the banks' losses.
called the McNary-
Congress tried to help out farmers with a piece of
Haugen bill. This called for federal price-
and tobacco. The government would buy.
for key products such as wheat, com, cotton,
crops at guaranteed prices and sell them on the
world market. President Coolidge vetoed the bill twice. He commented, "Farmers have never made
I don't believe we can do much about it."
CONSUMERS HAVE LESS MONEY TO SPEND As farmers' incomes fell, they bought fewer goods and
services, but the problem was larger. By the late
Americans were buying.
- mainly
because of rising prices, stagnant wages, unbalanced distribution of income, and overbuying on credit in the
preceding years. Production had also expanded much faster than
, resulting in an ever-widening
gap between the rich and the poor.
LIVING ON CREDIT Although many Americans appeared to be prosperous during the 1920s, in fact they
were living beyond their means. They often bought goods on
- an arrangement in which
consumers agreed to buy now and pay later for purchases. This was often in the form of an
plan (usually in monthly payments) that included
charges.
By making credit easily available, businesses encouraged Americans to pile up a large consumer
Many people then had trouble paying off their growing debts. Faced with debt, consumers cut
back on
UNEVEN DISTRIBUTION OF INCOME During the 1920s, the rich got richer, and the poor got poorer.
Between
the income of the wealthiest 1 percent of the population rose by 75
percent, compared with a 9 percent increase for Americans as a whole.
and
2