How Hoover And FDR Faced The Depression In The U.S. Essay

Length: 3 pages Subject: Economics Type: Essay Paper: #32263745 Related Topics: Treaty Of Versailles, Depression, Prohibition, Bailouts
Excerpt from Essay :

Great Depression and the Presidents' Reaction

The Great Depression did not have its origins in the United States, even though its effects were deeply felt there. The major causes of the Great Depression were numerous and yet related. This paper will discuss these causes and show what Hoover and FDR did to respond to the Depression.

Major Causes

The major causes of the Great Depression stemmed from the outcome of WW1: war reparations were forced upon Germany, who could not repay them. Europe as a whole was in financial straits and could not afford to import the American products that Americans were used to exporting. Also, the same credit structure problems that afflicted America were an international affliction. Essentially, the banks were in control of the global money supply (thanks to the Federal Reserve Act of 1913 -- and the Great War that soon followed, which allowed American banks to "bailout" foreign governments with loans that they could never truly repay, turning states like Germany into debt colonies). The economic relationship and interdependency of the Western powers was wrecked as a result, and this wreckage was realized in the effects of the Great Depression, the beginning of which was seen in the market crash of Black Tuesday, October 29, 1929: those who had invested on "margin" now learned what a "margin call" was -- how badly it could hurt and how quickly they could lose everything to the big banks and their method of predatory lending. So while the Great Depression did not have its origins in the United States (the war and the Treaty of Versailles planted the seeds of economic woe along with the international banking houses), the advent of the Depression in America was "helped along" so to speak by the banking policies that had emerged in the U.S. And the stock market "bubble" that occurred between 1928 and 1929 when stocks rose by 40% thanks in large part to margin spending and Federal Reserve monetary policies like keeping interest rates low (same then as now), which fueled speculation in the stock market.

Response of Hoover and Republicans

Hoover's response was essentially to do nothing. Hoover's 1928 opponent, Al Smith, had at least pledged to...

...

Hoover did not even do this. The Republicans had been in the back pocket of Wall Street since the 19th century. Prohibition had ended an industry important to the economy of the U.S. And now the economy was based on just a few major industries that could not sustain the nation's growth. That along with wealth disparity and high protective tariffs introduced under Hoover (which killed trade) like the Smoot-Hawley tariff (highest tariff in a century), demonstrated the inefficiency of the highest political office and the party that had essentially been in power for more than a quarter century. Hoover's Reconstruction Finance Corporation was basically a failure when it came to bailing out banks, railroads and corporations: the problem of debt cannot be solved by throwing more debt at it (same then as now). The Republicans essentially appeared to be in the business of bankrupting businesses -- which could then be gobbled up by bigger banks, competitors, and monopolists, who could afford to survive the carnage. This era was essentially a consolidation of power at the expense of millions, as the big corporations looked overseas for newer markets to dominate.

FDR and the New Deal: Changing the Course of American History

The election of FDR put an end to Prohibition and his New Deal economic policies provided a socialist response to the ravaging principles of usurious capitalism. FDR unleashed a barrage of "Alphabet Programs" designed to put Americans back to work. These were: the Agricultural Adjustment Act (AAA), which paid farmers to not grow crops (a twist on the Hoover legacy -- do nothing and pay others to do it too); the National…

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