The Wall Street Crash of 1929 occurred in late October of that year.

Shares of stock dropped sharply in value and billions of dollars were

lost. The crash was most devastating on two days: October 24th,
which became known as Black Thursday, and October 29th, called
Black Tuesday. The event marked the beginning of the Great
Depression, a worldwide decade-long economic depression. It would
take 25 years for the market to regain the value lost.
The crash had three main causes: buying on margin, overproduction
of goods, and laissez-faire government policies.
A month before the crash, the stock market was booming due to
strong demand for American goods overseas after World War I. The
market peaked when the Dow Jones Industrial Average, an index
used as a benchmark to track market performance, hit 381.
People were overconfident that the market would continue to grow,
leading many people to “buy on margin.” Buying on margin means
purchasing shares with mostly borrowed money. People were
overconfident about the market and felt comfortable taking on loans
and banks felt comfortable issuing them.
There was also overproduction of goods in manufacturing and
agricultural industries. Because factories produced more goods than
there was demand for, there was an oversupply, which led to lower
prices. Many companies suffered losses due to this, which led to their
share prices plummeting.
In the background of all of this was the government’s laissez-faire
economic philosophy by Republican presidents. According to the
laissez-faire economic philosophy, the government should not interfere
in the market, because the market can correct itself and government
regulation will only restrain economic growth.
Under the Republican administrations of Warren Harding, Calvin
Coolidge, and Herbert Hoover, there was very little regulation of
financial institutions and corporations. Combined with low taxes and
decreased federal spending, these policies led to a severe wealth gap
in American society. The government was not well-equipped to
prevent and react to the crash. It wasn’t until after the Great
Depression had begun that President Hoover attempted to intervene
in the market, which was ultimately too late.
The Dow Jones average that was at 381 before the crash bottomed
out at 41 in July 1932.
The Wall Street Crash of 1929 was not caused by one single factor,
but this combination of causes. The crash led to a collective panic
from the American people. As some banks closed due to their losses,
many Americans rushed to withdraw all their savings. Banks had
invested this money and didn't have enough available for the people to
withdraw. This led to an economic spiral as thousands of banks failed
and billions of dollars were lost.
The Dust Bowl refers to a period of severe drought and dust storms that struck the
Midwest and Central Plains regions from the summer of 1931 to the fall of 1939.

The Great Depression had already begun and the Dust Bowl made the harsh
economic downturn even more devastating for many.

This environmental disaster affected 19 states, but the effects were most severe in
Colorado, Kansas, New Mexico, Texas, and Oklahoma.

Many farmers, some inexperienced, lived in this area, in large part because of
Congress’s passage of the Homestead Act in 1862, which had granted land to
settlers to farm. After World War I, millions of acres in the Great Plains had been
used for growing wheat.

In the 1930s, a combination of multiple factors – the overuse of the land for growing
wheat and grazing livestock, poor land management practices, and severe waves of
drought that lasted for years – led to the Dust Bowl.

Heavy winds eroded the topsoil of the region, resulting in large dark blizzards of
sand, dirt, and dust that blocked out the sun. This covered everything in feet of dust
and sometimes blew dust all the way to the East Coast.

The large amounts of dust in the air also killed livestock and caused children to
develop pneumonia. Combined with the lack of rain, farmers weren’t able to grow
much on their farms.

Additionally, the Great Depression was suppressing prices for agricultural goods.
Banks began foreclosing on farmers and auctioning off their farms and farming
equipment.

In 1932, President Herbert Hoover sent emergency aid to the affected areas. In
1935, President Franklin D. Roosevelt set up drought relief programs, such as the
Prairie States Forestry Project which employed local farmers to grow trees as a way
to block some of the wind erosion.

Unable to farm in these conditions, approximately 2.5 million people, known

pejoratively as “Okies,” migrated away from regions affected by the Dust Bowl, with
most of them trekking to California.

By 1941, many of the affected areas were getting normal levels of rainfall. More
importantly, the US learned many lessons about agricultural practices that made it
ready for the next drought.

President Franklin D. Roosevelt took office in 1933, in the midst of the Great
Depression. As he promised in his campaign, Roosevelt quickly acted to provide aid
to those in need and to help the economy.

FDR, as he was known, was elected for his campaign promise of a New Deal. This
platform featured a range of federal programs to help provide the "Three Rs" – relief,
recovery, and reform.
Much of FDR's New Deal legislation was enacted in the first three months of his
presidency, also known as the Hundred Days.

"Relief" referred to immediate economic help for the people hurt by the Great
Depression, namely the poor and unemployed.

FDR was quick to provide needed relief. Two days after he took office, Roosevelt
declared a Bank Holiday, which suspended all banking activity for four days.
Americans had been anxiously withdrawing their bank deposits and depleting many
banks of all their cash.

During these four days, Congress passed the Emergency Banking Act, which
worked to stabilize the banking system and insured bank deposits.

To alleviate high unemployment, two temporary job creation programs were created
called the Civil Conservation Corp (CCC) and the Civil Works Administration (CWA).
These provided a welcome solution for the many Americans desperate to find work.

In addition, the Federal Emergency Relief Act (FERA) provided grants to state
agencies that, in turn, provided economic assistance to the people in those states.

“Recovery” referred to restoring the economy back to what it was by creating new
jobs and spending federal money to revive the economy.

To stimulate the economy, FDR created temporary programs like the Agricultural
Adjustment Act (AAA), which increased agricultural prices by controlling the amount
of supply, and the National Industrial Recovery Act (NIRA), which controlled wages
and prices.

The creation of the Home Owners Loan Corporation (HOLC) transformed the way
mortgage loans were carried out and helped homeowners who were having trouble
paying back their mortgage loans during the Great Depression.

Other recovery agencies and legislation included the Works Progress Administration
(WPA), and the National Youth Administration (NYA), the Federal Housing Act
(FHA).

The last "R", for "Reform" referred to implementing new regulations and permanent
programs into the financial system to avoid another economic depression in the
future.
This included the Securities Exchange Act, which created the Securities and
Exchange Commission (SEC) to regulate the stock market. The Social Security
Administration (SSA) provided and continues to provide economic assistance to the
elderly and other more vulnerable populations. Today, social security is one of the
most popular programs the government has ever created.

As a way to protect workers and enhance workers’ welfare, the National Labor
Relations Board (NLRB) was created to guarantee the right of workers to enter into
unions and engage in collective bargaining. Prior to this, employers could condition
someone’s employment on a promise to not join a trade union.

Another major reform was the Federal Deposit Insurance Corporation (FDIC) that
insures bank deposits up to $250,000. Today, if your bank went out of business, your
money is insured by the government and you can get it back thanks to this New Deal
program.

Franklin D. Roosevelt's New Deal platform created an incredible number of federal

agencies to carry out new policies and regulations.

Almost all of these agencies had an acronym like the CCC, TVA, or HOLC.
Therefore, they came to be known as FDR's "Alphabet Soup Agencies" or just
"Alphabet Agencies."

Here are some of the more well-known New Deal Alphabet Agencies:

Civil Conservation Corps (CCC)

The CCC was established on April 5, 1933, as a way to alleviate America's rising
unemployment while also promoting environmental goals.

Unemployed, unmarried men from ages 18-25 were offered employment on

environmental projects, such as fighting forest fires or planting trees.

The CCC was considered to be successful -- employing 3 million men over the
lifetime of the program.

Tennessee Valley Authority (TVA)

The TVA was signed into law in May 1933. In 1916, work had begun on a
hydroelectric dam, called the Wilson Dam, in Muscle Shoals, Alabama, a small town
south of the Tennessee River. The dam was never finished.

The TVA was created to finish the project and also enhance the development of
irrigation and energy production in the area. Today, the TVA continues to provide
electricity to 10 million people in the southeastern region of the US.

Works Progress Administration (WPA)

The WPA was created by FDR’s executive order in 1935, when the unemployment
rate had reached 20%. The WPA provided building and infrastructure jobs to
unemployed and unskilled men. The program was successful in massively improving
America's infrastructure. By the time the program ended in 1943, the WPA had
overseen the building of 130 new hospitals, more than 4,000 schools, and 29,000
bridges.

Agricultural Adjustment Act (AAA)

The AAA was signed in May 1933 in direct response to the overproduction of
agricultural goods. The Act subsidized farmers who cut their production of goods,
which alleviated the agricultural surplus and led to higher prices. This provided relief
for farmers, many of whom were also suffering from the effects of the Dust Bowl.

Social Security Administration (SSA)

FDR signed the Social Security Act in August 1935. The program was inspired by
European models, in which people paid for their own future economic security by
contributing a portion of their income.

The Act provided economic assistance to retirees, who were especially vulnerable
during the Depression. In addition, the Act also created unemployment insurance,
health insurance, and economic assistance for widows with children and the
disabled.

Social Security remains popular today.

Federal Deposit Insurance Corporation (FDIC)

The FDIC was established by the Banking Act of 1933, which regulated both
investment and commercial banks. When the stock market crashed in 1929, people
panicked and began pulling their money from banks. Because many banks had
invested money in the stock market, many banks ran out of money and went
bankrupt.

In addition to providing oversight for banks, the FDIC insures bank deposits. Initially,
the FDIC insured deposits of up to $2,500, and today, it insures up to $250,000 per
person.

The FDIC is considered very successful in increasing people’s confidence about

their deposits in banks.

Home Owners Loan Corp (HOLC)

In 1933, Congress passed the Homeowners Loan Act, which created the HOLC,
transforming the way mortgages worked. The goal of the agency was to refinance
home mortgages that were in default (meaning when a loan is not being paid back)
or at risk of foreclosure (meaning when a bank sells the mortgaged property to
recover the loan amount).

Before the HOLC, mortgage loans had terms that were only 5 to 10 years, meaning
homeowners had to come up with a lot of money in a short period of time.

The HOLC offered refinancing for these strict loans and in turn, offered up to 25
years for repayment. These changes, among many others, contributed to the rise in
homeownership in America.

When Franklin D. Roosevelt took office as America's new president in 1933, he

wanted to connect with Americans who were suffering through the Great
Depression.

FDR, as he was known, decided to use the relatively new medium of radio to
address the nation. Radio broadcasting in America had begun in the 1920s and by
the time FDR took office, most homes had a radio.

From 1933 - 1944, FDR regularly addressed the nation over the radio on various
topics. These conversations were known as “fireside chats” because they were
comforting and fairly casual.
For many Americans, it felt like FDR was sitting by the fire in their living room and
chatting with them one-on-one.

FDR’s first fireside chat was on March 12, 1933, just a week after he was
inaugurated. Throughout the first few years of his administration, he assured the
American people that he was putting in place proper measures to combat the Great
Depression.

He spoke about his New Deal and its programs designed to help provide
employment and economic relief.

On April 28, 1935, FDR announced new policies that would be part of the Second
New Deal, such as the Social Security Act and more work relief programs.

FDR explained that Social Security would help the elderly, who were struggling more
during the Great Depression, and also provide unemployment insurance to help
cushion the shock of unemployment.

As much of the administration’s focus started to move from the Great Depression to
the start of World War 2, so did the focus of the fireside chats.

On September 3, 1939, when World War 2 was just beginning, FDR assured the
American people that the US would try to remain neutral and stay out of the war.
FDR also assured everyone that information would not be withheld and that the
American people were “the best informed people in all the world.”

When the Japanese attacked Pearl Harbor on December 7, 1941, FDR addressed
the nation in a fireside chat that night, informing everyone that America was officially
joining World War 2 to fight for peace and liberty.

On October 12, 1942, FDR updated the American people about the war and also
urged all people, including women and even high school students, to join the
workforce to ramp up production for war materials.

FDR went on to broadcast a total of 31 fireside chats. It was the first time in history
that the majority of people in a nation could listen directly to their leader.

They made the American people feel like the president was talking directly to them.
Though the topics were serious, many people felt comforted by FDR’s casual and
conversational tone.
They helped inform people about what the federal government was planning and are
often credited with helping keep Roosevelt's popularity high.

The Great Depression was the worst economic period in history. In the United
States, unemployment rose to 25% at its highest level during the Great Depression.
Literally, a quarter of the country's workforce was jobless.

This number translated to 15 million unemployed Americans in 1933. As the

Depression spread across the globe, some countries saw unemployment as high as
33%.

There are several reasons why unemployment rose so high during this period.

First, people who had money invested in the stock market lost much of their savings
during the Wall Street Crash of 1929. This caused them to spend less, which created
lower demand for goods and services.

With businesses seeing a fall in spending, they cut back on output and employed
fewer workers. This was particularly noticeable for luxury goods like motor cars.

The next major reason for unemployment also began with the stock market crash.
When shares fell, many investors and ordinary people lost significant sums and went
bankrupt.

Banks started to see loan defaults where people could not afford to pay their
mortgages. There were concerns banks were running out of money. This led to
well-publicized "bank runs" where lines of people sought to withdraw their savings
before their bank closed. Many banks went bankrupt leading to people losing their
entire savings. This led to a fall in the money supply and deflation (falling prices).

Another major reason for unemployment came from an agricultural recession. Less
demand for goods led to lower prices and farming often became uneconomical. Dust
storms in the Midwest also devastated farms. Many jobs were lost in rural areas,
leading to a large migrant workforce seeking employment in new places, especially
California.

The next reason for unemployment was a trade war. In response to worsening
economies, countries began raising tariffs to protect their own industries. In 1930,
the US passed the Hawley-Smoot Tariff, which placed tariffs on 20,000 imported
goods. However, this led to retaliation as other countries placed tariffs on American
exports. This led to a further decline in trade and new job losses, worsening the
Depression worldwide.

Finally, poor government policies worsened unemployment. In 1930, the US Federal

Reserve temporarily raised interest rates to try and protect the value of the dollar
and the gold standard.

This was a counter-intuitive policy, but highlights a problem of the gold standard and
trying to protect the value of the currency – rather than provide monetary stimulus. If
the government had instead lowered interest rates, it would have encouraged
spending and helped promote the economy.