Misplaced Pages

#934065

106-432: By 1932, two main groups supported a law outlining the specifics of Philippine independence: Great Depression -era American farmers competing against tariff-free Filipino sugar and coconut oil; and Filipinos seeking Philippine independence. The Hare–Hawes–Cutting Act was authored by South Carolina Representative Butler Hare , Missouri Senator Harry Bartow Hawes and New Mexico Senator Bronson M. Cutting . It passed by

212-634: A deflationary spiral started in 1931. Farmers faced a worse outlook; declining crop prices and a Great Plains drought crippled their economic outlook. At its peak, the Great Depression saw nearly 10% of all Great Plains farms change hands despite federal assistance. At first, the decline in the U.S. economy was the factor that triggered economic downturns in most other countries due to a decline in trade, capital movement, and global business confidence. Then, internal weaknesses or strengths in each country made conditions worse or better. For example,

318-418: A silver standard , almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries . This partly explains why the experience and length of the depression differed between regions and states around

424-408: A case study of Mississippi , Vogt (1985) examined two areas of RFC funding: aid to banking, which helped many Mississippi banks survive the economic crisis, and work relief, which Roosevelt used to pump money into the state's relief program by extending loans to businesses and local government projects. Although charges of political influence and racial discrimination were levied against RFC activities,

530-604: A former privately run bank, bearing no relation to the U.S. government (not to be confused with the Federal Reserve ). Unable to pay out to all of its creditors, the bank failed. Among the 608 American banks that closed in November and December 1930, the Bank of United States accounted for a third of the total $ 550 million deposits lost and, with its closure, bank failures reached a critical mass. In an initial response to

636-467: A greater reduction in credit. On 5 April 1933, President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates , coins and bullion illegal, reducing the pressure on Federal Reserve gold. British economist John Maynard Keynes argued in The General Theory of Employment, Interest and Money that lower aggregate expenditures in the economy contributed to

742-507: A massive decline in income and to employment that was well below the average. In such a situation, the economy reached equilibrium at low levels of economic activity and high unemployment. Reconstruction Finance Corporation The Reconstruction Finance Corporation ( RFC ) was an independent agency of the United States federal government that served as a lender of last resort to US banks and businesses. Established in 1932 by

848-600: A modern industrial city handled shortages of money and resources. Often they updated strategies their mothers used when they were growing up in poor families. Cheap foods were used, such as soups, beans and noodles. They purchased the cheapest cuts of meat—sometimes even horse meat—and recycled the Sunday roast into sandwiches and soups. They sewed and patched clothing, traded with their neighbors for outgrown items, and made do with colder homes. New furniture and appliances were postponed until better days. Many women also worked outside

954-402: A monetary contraction first-hand were forced to join the deflationary policy since higher interest rates in countries that performed a deflationary policy led to a gold outflow in countries with lower interest rates. Under the gold standard's price–specie flow mechanism , countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and

1060-567: A serious issue in the 1930s. Support for increasing welfare programs during the depression included a focus on women in the family. The Conseil Supérieur de la Natalité campaigned for provisions enacted in the Code de la Famille (1939) that increased state assistance to families with children and required employers to protect the jobs of fathers, even if they were immigrants. In rural and small-town areas, women expanded their operation of vegetable gardens to include as much food production as possible. In

1166-480: A small cadre of Labour, but the vast majority of Labour leaders denounced MacDonald as a traitor for leading the new government. Britain went off the gold standard , and suffered relatively less than other major countries in the Great Depression. In the 1931 British election, the Labour Party was virtually destroyed, leaving MacDonald as prime minister for a largely Conservative coalition. In most countries of

SECTION 10

#1732783254935

1272-713: A standstill agreement froze Germany's foreign liabilities for six months. Germany received emergency funding from private banks in New York as well as the Bank of International Settlements and the Bank of England. The funding only slowed the process. Industrial failures began in Germany, a major bank closed in July and a two-day holiday for all German banks was declared. Business failures were more frequent in July, and spread to Romania and Hungary. The crisis continued to get worse in Germany, bringing political upheaval that finally led to

1378-410: Is a stub . You can help Misplaced Pages by expanding it . Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty; drastic reductions in liquidity , industrial production, and trade; and widespread bank and business failures around the world. The economic contagion began in 1929 in

1484-658: Is a consensus that the Federal Reserve System should have cut short the process of monetary deflation and banking collapse, by expanding the money supply and acting as lender of last resort . If they had done this, the economic downturn would have been far less severe and much shorter. Modern mainstream economists see the reasons in Insufficient spending, the money supply reduction, and debt on margin led to falling prices and further bankruptcies ( Irving Fisher 's debt deflation). The monetarist explanation

1590-493: Is supported by the contrast in how the crisis progressed in, e.g., Britain, Argentina and Brazil, all of which devalued their currencies early and returned to normal patterns of growth relatively rapidly and countries which stuck to the gold standard , such as France or Belgium. Frantic attempts by individual countries to shore up their economies through protectionist policies – such as the 1930 U.S. Smoot–Hawley Tariff Act and retaliatory tariffs in other countries – exacerbated

1696-539: The 1932 election , Hoover was defeated by Franklin D. Roosevelt , who from 1933 pursued a series of " New Deal " policies and programs to provide relief and create jobs, including the Civilian Conservation Corps , Federal Emergency Relief Administration , Tennessee Valley Authority , and Works Progress Administration . Historians disagree on the effects of the New Deal, with some claiming that

1802-626: The Great Depression in the United States, Federal Reserve board member Eugene Meyer proposed the establishment of a government agency empowered to make loans to banks and businesses in critical sectors of the US economy. Modeled after the War Finance Corporation , a government corporation that financially supported industries critical to the war effort during World War I, its purpose would be to stimulate economic growth in

1908-501: The Hoover administration to restore public confidence in the economy and banking to their pre- Depression levels, the RFC provided financial support to state and local governments, recapitalized banks to prevent bank failures and stimulate lending, and made loans to railroads, mortgage associations, and other large businesses. The Roosevelt administration 's New Deal reforms expanded

2014-937: The Lend-Lease Act and general counsel of the Foreign Economic Administration , joined as well. Lauchlin Currie , formerly of the Federal Reserve Board staff, was the deputy administrator to Leo Crowley . The RFC established eight new corporations and purchased an existing corporation. Its eight wartime subsidiaries were the Metals Reserve Company, Rubber Reserve Company , Defense Plant Corporation , Defense Supplies Corporation, War Damage Corporation, US Commercial Company, Rubber Development Corporation, and Petroleum Reserve Corporation. These corporations helped fund

2120-582: The New York Bank of United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. Friedman and Schwartz argued that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of

2226-836: The United States , the largest economy in the world, with the devastating Wall Street stock market crash of October 1929 often considered the beginning of the Depression. The Depression was preceded by a period of industrial growth and social development known as the " Roaring Twenties ". Much of the profit generated by the boom was invested in speculation , such as on the stock market , which resulted in growing wealth inequality . Banks were subject to minimal regulation under laissez-faire economic policies, resulting in loose lending and widespread debt. By 1929, declining spending had led to reductions in manufacturing output and rising unemployment . Share values continued to rise until

SECTION 20

#1732783254935

2332-556: The United States Congress in December 1932 but was vetoed by U.S. President Herbert Hoover . Congress overrode the veto on January 17, 1933. The Philippine Senate was required to ratify the law. With leaders such as Manuel L. Quezon opposing it, for some provisions were unrelated to independence. The Philippine Senate later rejected the bill. The bill itself proposed to have a 10-year transitionary period where

2438-539: The coming to power of Hitler's Nazi regime in January 1933. The world financial crisis now began to overwhelm Britain; investors around the world started withdrawing their gold from London at the rate of £2.5 million per day. Credits of £25 million each from the Bank of France and the Federal Reserve Bank of New York and an issue of £15 million fiduciary note slowed, but did not reverse,

2544-447: The 1937 recession that interrupted it). The common view among most economists is that Roosevelt's New Deal policies either caused or accelerated the recovery, although his policies were never aggressive enough to bring the economy completely out of recession. Some economists have also called attention to the positive effects from expectations of reflation and rising nominal interest rates that Roosevelt's words and actions portended. It

2650-813: The British crisis. The financial crisis now caused a major political crisis in Britain in August 1931. With deficits mounting, the bankers demanded a balanced budget; the divided cabinet of Prime Minister Ramsay MacDonald's Labour government agreed; it proposed to raise taxes, cut spending, and most controversially, to cut unemployment benefits 20%. The attack on welfare was unacceptable to the Labour movement. MacDonald wanted to resign, but King George V insisted he remain and form an all-party coalition " National Government ". The Conservative and Liberals parties signed on, along with

2756-471: The Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts. During World War I many countries suspended their gold standard in varying ways. There was high inflation from WWI, and in the 1920s in the Weimar Republic , Austria , and throughout Europe. In the late 1920s there

2862-521: The Dow returning to 294 (pre-depression levels) in April 1930, before steadily declining for years, to a low of 41 in 1932. At the beginning, governments and businesses spent more in the first half of 1930 than in the corresponding period of the previous year. On the other hand, consumers, many of whom suffered severe losses in the stock market the previous year, cut expenditures by 10%. In addition, beginning in

2968-489: The Federal Reserve did not act to limit the decline of the money supply was the gold standard . At that time, the amount of credit the Federal Reserve could issue was limited by the Federal Reserve Act , which required 40% gold backing of Federal Reserve Notes issued. By the late 1920s, the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit

3074-518: The Federal Reserve, the RFC would loan to banks, but it was designed to serve state-chartered banks and small banks in rural areas that were not part of the Federal Reserve System. Another distinction was that the RFC could make loans on the basis of collateral that the Federal Reserve and other lenders would not accept. The related Banking Act of 1932 , signed on February 27, broadened the Federal Reserve's lending powers, and gave it

3180-442: The Great Depression is right, or the traditional Keynesian explanation that a fall in autonomous spending, particularly investment, is the primary explanation for the onset of the Great Depression. Today there is also significant academic support for the debt deflation theory and the expectations hypothesis that – building on the monetary explanation of Milton Friedman and Anna Schwartz – add non-monetary explanations. There

3286-642: The Great Depression. According to the U.S. Senate website, the Smoot–Hawley Tariff Act is among the most catastrophic acts in congressional history. Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. Most historians and economists blame the Act for worsening the depression by seriously reducing international trade and causing retaliatory tariffs in other countries. While foreign trade

Hare–Hawes–Cutting Act - Misplaced Pages Continue

3392-481: The New Deal prolonged the Great Depression, as they argue that National Industrial Recovery Act of 1933 and National Labor Relations Act of 1935 restricted competition and established price fixing. John Maynard Keynes did not think that the New Deal under Roosevelt single-handedly ended the Great Depression: "It is, it seems, politically impossible for a capitalistic democracy to organize expenditure on

3498-578: The RFC authorized over US$ 2 billion of loans and investments each year, with a peak of over US$ 6 billion authorized in 1943. The magnitude of RFC lending had increased substantially during the war. The Petroleum Reserves Corporation was transferred to the Office of Economic Warfare , which was consolidated into the Foreign Economic Administration , which was transferred to the Reconstruction Finance Corporation and changed to

3604-525: The RFC from 1932 through 1941 was US$ 9.465 billion. Chairmen of the Board of Directors Administrators and Deputy Administrators The first RFC president was the former US Vice President Charles Dawes . He soon resigned to attend to his bank in Chicago , which was in danger of failing, and President Herbert Hoover appointed Atlee Pomerene of Ohio to head the agency in July 1932. The presidency of

3710-405: The RFC thus switched from a Republican to a Democrat . Hoover's reasons for reorganizing the RFC included: the broken health and resignations of Eugene Meyer , Paul Bestor, and Charles Dawes; the failure of banks to perform their duties to their clientele or to aid American industry; the country's general lack of confidence in the current board; and Hoover's inability to find any other man who had

3816-542: The RFC to create its own mortgage company to sell and insure mortgages. The Federal National Mortgage Association (also known as Fannie Mae) was established and funded by the RFC. It later became a private corporation. An Export–Import Bank was also created to encourage trade with the Soviet Union . Another bank was established to fund trade with all other foreign nations a month later. They eventually merged and make loans available to exports. Roosevelt wanted to reduce

3922-472: The RFC were no longer in demand. During the late 1940s RFC made a large loan to Northwest Orient Airlines earmarked for the purchase of ten Boeing Stratocruiser airliners. The loan became controversial, seen as a political favor to the Boeing Corporation, who supported the re-election campaign of President Harry S. Truman , and sparked a congressional inquiry. President Dwight D. Eisenhower

4028-442: The RFC's efforts, though in 1932, monetary conditions improved because the RFC slowed the decline in the nation's money supply. The original legislation establishing the RFC did not limit it to lending to financial institutions; it was also authorized to provide loans for railroad construction and crop lands. An amendment passed in July 1932 allowed the RFC to provide loans to state and municipal governments. The purpose of these loans

4134-544: The U.K. economy, which experienced an economic downturn throughout most of the late 1920s, was less severely impacted by the shock of the depression than the U.S. By contrast, the German economy saw a similar decline in industrial output as that observed in the U.S. Some economic historians attribute the differences in the rates of recovery and relative severity of the economic decline to whether particular countries had been able to effectively devaluate their currencies or not. This

4240-490: The U.S. unemployment rate down below 10%. World War II had a dramatic effect on many parts of the American economy. Government-financed capital spending accounted for only 5% of the annual U.S. investment in industrial capital in 1940; by 1943, the government accounted for 67% of U.S. capital investment. The massive war spending doubled economic growth rates, either masking the effects of the Depression or essentially ending

4346-713: The United States and restore public confidence in banking and the economy. It would replace the National Credit Corporation , an agency created in 1931 to restore the liquidity of banks on the brink of failure with loans funded by the interbank lending market . On January 22, 1932, the Reconstruction Finance Corporation Act was signed into law by President Herbert Hoover after being passed by Congress with broad bipartisan support. The Reconstruction Finance Corporation (RFC) began its operations on February2, 1932. Like

Hare–Hawes–Cutting Act - Misplaced Pages Continue

4452-622: The United States, agricultural organizations sponsored programs to teach housewives how to optimize their gardens and to raise poultry for meat and eggs. Rural women made feed sack dresses and other items for themselves and their families and homes from feed sacks. In American cities, African American women quiltmakers enlarged their activities, promoted collaboration, and trained neophytes. Quilts were created for practical use from various inexpensive materials and increased social interaction for women and promoted camaraderie and personal fulfillment. Oral history provides evidence for how housewives in

4558-543: The United States, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935–36. According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, The UK and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had

4664-638: The Wall Street crash, after which the slide continued for three years, which was accompanied by a loss of confidence in the financial system. By 1933, the U.S. unemployment rate had risen to 25 percent, about one-third of farmers had lost their land, and about half of the country's 25,000 banks had gone out of business. Many people, unable to pay mortgages or rent, became homeless and relied on begging or charities to feed themselves. The U.S. federal government initially did little to help. President Herbert Hoover , like many of his fellow Republicans , believed in

4770-675: The War Assets Corporation, and the War Assets Administration (the disposal function of the RFC was transferred to WAC on January 15, 1946, and to the WAA in March 1946) processed approximately 61,600 remaining World War II aircraft, Some 34,700 “utility“ type were sold for primarily commercial purposes, and 26,900 primarily combat types auctioned for scrapping. Most of the transports and trainers could be used in

4876-572: The War Assets Corporation. The War Assets Corporation was dissolved after March 25, 1946. Most lending to wartime subsidiaries ended in 1945, and all such lending ended in 1948. After the war, the Reconstruction Finance Corporation established five large storage, sales, and scrapping centers for Army Air Forces aircraft at the Albuquerque AAF , New Mexico ; Altus AAF , Oklahoma ; Kingman AAF , Arizona ; Ontario Army Air Field , California ; and Walnut Ridge AAF , Arkansas . Estimates of

4982-513: The War Damage Corporation provided for such insurance without compensation, but by express Congressional enactment Congress added §5(g) to the Reconstruction Finance Corporation Act, 15 USCA §606(b)(2) requiring that on and after July 1, 1942, the War Damage Corporation should issue insurance policies upon the payment of annual premiums. Under the terms of War Damage Corporation's charter an authorized capital stock of US$ 100,000,000

5088-498: The ability and was both nationally respected and available. Like the Federal Reserve, the RFC tended to bail out the banks that benefited the public the most. Butkiewicz (1995) shows that the RFC initially succeeded in reducing bank failures, but the publication of the names of loan recipients beginning in August 1932 (at the demand of Congress) significantly reduced its effectiveness, because it appeared that political considerations had motivated certain loans. Partisan politics hindered

5194-399: The agency made positive contributions and established a federal agency in local communities which provided a reservoir of experienced personnel to implement expanding New Deal programs. Roosevelt saw this corporation as an advantage to the national government. The RFC could finance projects without Congress approving them and the loans would not be included in budget expenditures. Soon the RFC

5300-415: The agency, and Jones turned the RFC into an empire with loans made in every state. Under the New Deal, the powers of the RFC were greatly expanded. The agency now purchased bank stock and extended loans for agriculture, housing, exports, businesses, governments, and disaster relief. Roosevelt soon directed the RFC to buy gold to change its market price. The original legislation did not call for identities of

5406-474: The agency, enabling it to direct disaster relief funds and provide loans for agriculture, exports, and housing. The RFC closed in 1957 when prosperity had been restored and for-profit private financial institutions could handle its mission. In total, the RFC gave US$ 2 billion in aid to state and local governments and made many loans, nearly all of which were repaid. In 1931, amidst the high rates of bank failure , deflation , and unemployment that characterized

SECTION 50

#1732783254935

5512-477: The approval of the President of the United States pursuant to §5(d) of the Reconstruction Finance Corporation Act or 1932, 15 USCA §606(b) for the purpose of providing insurance covering damage to property of American nationals not otherwise available from private insurers arising from "enemy attack including by the military, naval of air forces of the United States in resisting enemy attack". Prior to July 1, 1942,

5618-438: The banks receiving loans nor of any reports to Congress. This, however, was changed in July 1932 to make the RFC transparent. Bankers soon were hesitant to ask the RFC for a loan since depositers would become aware and begin to consider the possibility of their bank failing causing them to withdraw their deposits, a practice called bank running . The RFC also had a division that gave the states loans for emergency relief needs. In

5724-460: The banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did. With significantly less money to go around, businesses could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch . One reason why

5830-465: The behavior of housewives. The common view among economic historians is that the Great Depression ended with the advent of World War II . Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression, though some consider that it did not play a very large role in the recovery, though it did help in reducing unemployment. The rearmament policies leading up to World War II helped stimulate

5936-406: The civil fleet, with trainers disposed of for US$ 875 to US$ 2,400. The fighters and bombers were of little peacetime value, with a smattering being sold for conversions to useful civilian purposes like aerial firefighting (a mere handful survived such second careers to be preserved as warbirds preservation and exhibits in aviation museums ). After World War II ended, the type of loans provided by

6042-462: The collapse in global trade, contributing to the depression. By 1933, the economic decline pushed world trade to one third of its level compared to four years earlier. While the precise causes for the occurrence of the Great depression are disputed and can be traced to both global and national phenomena, its immediate origins are most conveniently examined in the context of the U.S. economy, from which

6148-475: The crash was a mere symptom of more general economic trends of the time, which had already been underway in the late 1920s. A contrasting set of views, which rose to prominence in the later part of the 20th century, ascribes a more prominent role to failures of monetary policy . According to those authors, while general economic trends can explain the emergence of the downturn, they fail to account for its severity and longevity; they argue that these were caused by

6254-625: The crisis, the U.S. Congress passed the Smoot–Hawley Tariff Act on 17 June 1930. The Act was ostensibly aimed at protecting the American economy from foreign competition by imposing high tariffs on foreign imports. The consensus view among economists and economic historians (including Keynesians , Monetarists and Austrian economists ) is that the passage of the Smoot–Hawley Tariff had, in fact, achieved an opposite effect to what

6360-633: The decade. The Depression had devastating economic effects on both wealthy and poor countries: all experienced drops in personal income , prices ( deflation ), tax revenues, and profits. International trade fell by more than 50%, and unemployment in some countries rose as high as 33%. Cities around the world , especially those dependent on heavy industry , were heavily affected. Construction virtually halted in many countries, and farming communities and rural areas suffered as crop prices fell by up to 60%. Faced with plummeting demand and few job alternatives, areas dependent on primary sector industries suffered

6466-408: The depression. Not all governments enforced the same measures of protectionism. Some countries raised tariffs drastically and enforced severe restrictions on foreign exchange transactions, while other countries reduced "trade and exchange restrictions only marginally": The gold standard was the primary transmission mechanism of the Great Depression. Even countries that did not face bank failures and

SECTION 60

#1732783254935

6572-562: The development of synthetic rubber , the construction and operation of a tin smelter, and the establishment of abaca ( Manila hemp ) plantations in Central America . Both natural rubber and abaca (used to produce rope products) had been produced primarily in South Asia , which came under Japanese control during the war. The RFC's programs encouraged the development of alternative sources of these materials. Synthetic rubber, which

6678-435: The domestic price level to decline ( deflation ). There is also consensus that protectionist policies, and primarily the passage of the Smoot–Hawley Tariff Act , helped to exacerbate, or even cause the Great Depression. Some economic studies have indicated that the rigidities of the gold standard not only spread the downturn worldwide, but also suspended gold convertibility (devaluing the currency in gold terms) that did

6784-402: The drop in demand. Monetarists believe that the Great Depression started as an ordinary recession, but the shrinking of the money supply greatly exacerbated the economic situation, causing a recession to descend into the Great Depression. Economists and economic historians are almost evenly split as to whether the traditional monetary explanation that monetary forces were the primary cause of

6890-427: The economies of Europe in 1937–1939. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilization of manpower following the outbreak of war in 1939 ended unemployment. The American mobilization for World War II at the end of 1941 moved approximately ten million people out of the civilian labor force and into the war. This finally eliminated the last effects from the Great Depression and brought

6996-576: The end of the month. A large sell-off of stocks began in mid-October. Finally, on 24 October, Black Thursday , the American stock market crashed 11% at the opening bell. Actions to stabilize the market failed, and on 28 October, Black Monday, the market crashed another 12%. The panic peaked the next day on Black Tuesday, when the market saw another 11% drop. Thousands of investors were ruined, and billions of dollars had been lost; many stocks could not be sold at any price. The market recovered 12% on Wednesday but by then significant damage had been done. Though

7102-500: The explanations of the Keynesians and monetarists. The consensus among demand-driven theories is that a large-scale loss of confidence led to a sudden reduction in consumption and investment spending. Once panic and deflation set in, many people believed they could avoid further losses by keeping clear of the markets. Holding money became profitable as prices dropped lower and a given amount of money bought ever more goods, exacerbating

7208-503: The few women in the labor force, layoffs were less common in the white-collar jobs and they were typically found in light manufacturing work. However, there was a widespread demand to limit families to one paid job, so that wives might lose employment if their husband was employed. Across Britain, there was a tendency for married women to join the labor force, competing for part-time jobs especially. In France, very slow population growth, especially in comparison to Germany continued to be

7314-505: The first week of June, 540 million in the second, and 150 million in two days, 19–20 June. Collapse was at hand. U.S. President Herbert Hoover called for a moratorium on payment of war reparations . This angered Paris, which depended on a steady flow of German payments, but it slowed the crisis down, and the moratorium was agreed to in July 1931. An International conference in London later in July produced no agreements but on 19 August

7420-495: The gold value of the US dollar. In order to accomplish this, the RFC purchased large amounts of gold until a price floor was set. The RFC's powers, which had grown even before World War II began, further expanded during the war. President Roosevelt merged the RFC and the Federal Deposit Insurance Corporation (FDIC), which was one of the landmarks of the New Deal. Oscar Cox, a primary author of

7526-606: The government tried to reshape private household consumption under the Four-Year Plan of 1936 to achieve German economic self-sufficiency. The Nazi women's organizations, other propaganda agencies and the authorities all attempted to shape such consumption as economic self-sufficiency was needed to prepare for and to sustain the coming war. The organizations, propaganda agencies and authorities employed slogans that called up traditional values of thrift and healthy living. However, these efforts were only partly successful in changing

7632-761: The government will establish a semi-autonomous government under an elected president. After the rejection, a new bill, the Tydings–McDuffie Act of 1934, was passed by the United States Government. This was ratified by the Philippine Senate for eliminating the rejection reasons and resulted in the 1935 Philippine Constitution , the establishment of the Philippine Commonwealth and ultimately Philippine independence on July 4, 1946. This legislation article

7738-519: The home, or took boarders, did laundry for trade or cash, and did sewing for neighbors in exchange for something they could offer. Extended families used mutual aid—extra food, spare rooms, repair-work, cash loans—to help cousins and in-laws. In Japan, official government policy was deflationary and the opposite of Keynesian spending. Consequently, the government launched a campaign across the country to induce households to reduce their consumption, focusing attention on spending by housewives. In Germany,

7844-527: The initial crisis spread to the rest of the world. In the aftermath of World War I , the Roaring Twenties brought considerable wealth to the United States and Western Europe. Initially, the year 1929 dawned with good economic prospects: despite a minor crash on 25 March 1929, the market seemed to gradually improve through September. Stock prices began to slump in September, and were volatile at

7950-563: The lack of an adequate response to the crises of liquidity that followed the initial economic shock of 1929 and the subsequent bank failures accompanied by a general collapse of the financial markets. After the Wall Street Crash of 1929 , when the Dow Jones Industrial Average dropped from 381 to 198 over the course of two months, optimism persisted for some time. The stock market rose in early 1930, with

8056-439: The long run. A main reason for such loans was to ensure that depositors got their money back. The Reconstruction Finance Corporation spent US$ 1.5 billion in 1932, US$ 1.8 billion in 1933, and US$ 1.8 billion in 1934 before dropping to about US$ 350 million a year. In August 1939, on the eve of World War II, it greatly expanded to build munitions factories. In 1941, it disbursed US$ 1.8 billion. The total loaned or otherwise disbursed by

8162-465: The market entered a period of recovery from 14 November until 17 April 1930, the general situation had been a prolonged slump. From 17 April 1930 until 8 July 1932, the market continued to lose 89% of its value. Despite the crash, the worst of the crisis did not reverberate around the world until after 1929. The crisis hit panic levels again in December 1930, with a bank run on the Bank of United States ,

8268-414: The mid-1930s, a severe drought ravaged the agricultural heartland of the U.S. Interest rates dropped to low levels by mid-1930, but expected deflation and the continuing reluctance of people to borrow meant that consumer spending and investment remained low. By May 1930, automobile sales declined to below the levels of 1928. Prices, in general, began to decline, although wages held steady in 1930. Then

8374-423: The monetary base and by not injecting liquidity into the banking system to prevent it from crumbling, the Federal Reserve passively watched the transformation of a normal recession into the Great Depression. Friedman and Schwartz argued that the downward turn in the economy, starting with the stock market crash, would merely have been an ordinary recession if the Federal Reserve had taken aggressive action. This view

8480-502: The most to make recovery possible. Every major currency left the gold standard during the Great Depression. The UK was the first to do so. Facing speculative attacks on the pound and depleting gold reserves , in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets. Japan and the Scandinavian countries followed in 1931. Other countries, such as Italy and

8586-427: The most. The outbreak of World War II in 1939 ended the Depression, as it stimulated factory production, providing jobs for women as militaries absorbed large numbers of young, unemployed men. The precise causes for the Great Depression are disputed. One set of historians, for example, focuses on non-monetary economic causes. Among these, some regard the Wall Street crash itself as the main cause; others consider that

8692-582: The need to balance the national budget and was unwilling to implement expensive welfare spending . In 1930, Hoover signed the Smoot–Hawley Tariff Act , which taxed imports with the intention of encouraging buyers to purchase American products, which worsened the Depression because foreign governments retaliated with tariffs on American exports. In 1932, Hoover established the Reconstruction Finance Corporation , which offered loans to businesses and support to local governments. In

8798-404: The number of surplus airplanes ran as high as 150,000. By the summer of 1945, at least 30 sales-storage depots and 23 sales centers were in operation. In November 1945, it was estimated that a total of 117,210 aircraft would be transferred as surplus. Many thousands ended up sold or gifted by the US military to the air forces of friendly allies around the globe. Between 1945 and June 1947, the RFC,

8904-483: The physical volume of exports fall, but also the prices fell by about 1 ⁄ 3 as written. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. Governments around the world took various steps into spending less money on foreign goods such as: "imposing tariffs, import quotas, and exchange controls". These restrictions triggered much tension among countries that had large amounts of bilateral trade, causing major export-import reductions during

9010-480: The policies prolonged the Depression instead of shortening it. Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%; in the U.S., the Depression resulted in a 30% contraction in GDP. Recovery varied greatly around the world. Some economies, such as the U.S., Germany and Japan started to recover by the mid-1930s; others, like France, did not return to pre-shock growth rates until later in

9116-459: The political situation in Europe. In their book, A Monetary History of the United States , Milton Friedman and Anna J. Schwartz also attributed the recovery to monetary factors, and contended that it was much slowed by poor management of money by the Federal Reserve System . Chairman of the Federal Reserve (2006–2014) Ben Bernanke agreed that monetary factors played important roles both in

9222-411: The power to make national policy to mitigate the problems with the economy. Eugene Meyer , who had pushed for both pieces of legislation, after heading up an organization similar to the RFC during World War I , was a governor of the Federal Reserve, and chairman of the Board of the RFC. Essentially, the RFC was the "discount lending" arm of the Federal Reserve. The initial funding for the RFC came from

9328-587: The sale of US$ 500 million worth of stocks and bonds to the United States Treasury . To obtain more capital, it sold US$ 1.5 billion in bonds to the Treasury, which then sold them to the general public. In its first couple of years, the RFC needed a loan of US$ 51.3 billion from the Treasury and US$ 3.1 billion from the public. The RFC lent to solvent institutions that could not be sold to repay their existing liabilities but would be able to do so in

9434-434: The scale necessary to make the grand experiments which would prove my case—except in war conditions." According to Christina Romer , the money supply growth caused by huge international gold inflows was a crucial source of the recovery of the United States economy, and that the economy showed little sign of self-correction. The gold inflows were partly due to devaluation of the U.S. dollar and partly due to deterioration of

9540-464: The tin and abaca programs were handled by General Services Administration . The Commodity Credit Corporation , which was created to help farmers, remained in operation. Another establishment kept in operation is the Export–Import Bank, which encourages exports. In 1991, Rep. Jamie L. Whitten (Democrat of Mississippi) introduced a bill to reestablish the RFC, but it did not receive a hearing by

9646-476: The world, recovery from the Great Depression began in 1933. In the U.S., recovery began in early 1933, but the U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of about 15% in 1940, albeit down from the high of 25% in 1933. There is no consensus among economists regarding the motive force for the U.S. economic expansion that continued through most of the Roosevelt years (and

9752-673: The world. The financial crisis escalated out of control in mid-1931, starting with the collapse of the Credit Anstalt in Vienna in May. This put heavy pressure on Germany, which was already in political turmoil. With the rise in violence of National Socialist ('Nazi') and Communist movements, as well as investor nervousness at harsh government financial policies, investors withdrew their short-term money from Germany as confidence spiraled downward. The Reichsbank lost 150 million marks in

9858-778: The worldwide economic decline and eventual recovery. Bernanke also saw a strong role for institutional factors, particularly the rebuilding and restructuring of the financial system, and pointed out that the Depression should be examined in an international perspective. Women's primary role was as housewives; without a steady flow of family income, their work became much harder in dealing with food and clothing and medical care. Birthrates fell everywhere, as children were postponed until families could financially support them. The average birthrate for 14 major countries fell 12% from 19.3 births per thousand population in 1930, to 17.0 in 1935. In Canada, half of Roman Catholic women defied Church teachings and used contraception to postpone births. Among

9964-658: Was a scramble to deflate prices to get the gold standard's conversation rates back on track to pre-WWI levels, by causing deflation and high unemployment through monetary policy. In 1933 FDR signed Executive Order 6102 and in 1934 signed the Gold Reserve Act . The two classic competing economic theories of the Great Depression are the Keynesian (demand-driven) and the Monetarist explanation. There are also various heterodox theories that downplay or reject

10070-478: Was a small part of overall economic activity in the U.S. and was concentrated in a few businesses like farming, it was a much larger factor in many other countries. The average ad valorem (value based) rate of duties on dutiable imports for 1921–1925 was 25.9% but under the new tariff it jumped to 50% during 1931–1935. In dollar terms, American exports declined over the next four years from about $ 5.2 billion in 1929 to $ 1.7 billion in 1933; so, not only did

10176-505: Was able to buy bank preferred stock with the Emergency Banking Act of 1933. Buying stock would serve as collateral when banks needed loans. This, however, was somewhat controversial because if the RFC was a shareholder than it could interfere with salaries and bank management. The Federal Deposit Insurance Corporation (FDIC) was later created to help decrease bank failures and insure bank deposits. The second main assistance

10282-474: Was endorsed in 2002 by Federal Reserve Governor Ben Bernanke in a speech honoring Friedman and Schwartz with this statement: Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again. The Federal Reserve allowed some large public bank failures – particularly that of

10388-426: Was given by American economists Milton Friedman and Anna J. Schwartz . They argued that the Great Depression was caused by the banking crisis that caused one-third of all banks to vanish, a reduction of bank shareholder wealth and more importantly monetary contraction of 35%, which they called "The Great Contraction ". This caused a price drop of 33% ( deflation ). By not lowering interest rates, by not increasing

10494-488: Was in office when legislation terminated the RFC. It was "abolished as an independent agency by act of Congress (1953) and was transferred to the Department of the Treasury to wind up its affairs, effective June 1954. It was totally disbanded in 1957." The Small Business Administration was established to provide loans to small business, and training programs were created. Several federal agencies took over RFC assets, and

10600-500: Was in the form of Federal Reserve demand notes. A "promise of gold" is not as good as "gold in the hand", particularly when they only had enough gold to cover 40% of the Federal Reserve Notes outstanding. During the bank panics, a portion of those demand notes was redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by

10706-446: Was intended. It exacerbated the Great Depression by preventing economic recovery after domestic production recovered, hampering the volume of trade; still there is disagreement as to the precise extent of the Act's influence. In the popular view, the Smoot–Hawley Tariff was one of the leading causes of the depression. In a 1995 survey of American economic historians, two-thirds agreed that the Smoot–Hawley Tariff Act at least worsened

10812-484: Was not produced in the United States prior to the war, quickly became the primary source of rubber in the postwar years. The War Insurance Corporation was established December 13, 1941 by Act of June 10, 1941 (55 Stat. 249), was renamed the War Damage Corporation by Act of March 27, 1942 (56 Stat. 175), and its charter filed March 31, 1942. It had been created by the Federal Loan Administrator with

10918-633: Was provided, all of which was subscribed for by the Reconstruction Finance Corporation. The corporation was transferred from the Federal Loan Agency to the Department of Commerce by Executive Order #9071 of February 24, 1942, returned to the Federal Loan Agency by Act of February 24, 1945 (59 Stat. 5), and abolished by Act of June 30, 1947 (61 Stat. 202) with its functions assumed by Reconstruction Finance Corporation. The powers of War Damage Corporation, except for purposes of liquidation, terminated as of January 22, 1947. From 1941 through 1945,

11024-470: Was the rollback of those same reflationary policies that led to the interruption of a recession beginning in late 1937. One contributing policy that reversed reflation was the Banking Act of 1935 , which effectively raised reserve requirements, causing a monetary contraction that helped to thwart the recovery. GDP returned to its upward trend in 1938. A revisionist view among some economists holds that

11130-537: Was to farmers and their crop lands. The Commodity Credit Corporation was established to provide assistance. The agriculture was hit hard with a drought and machinery like the tractor. One benefit it provided to these rural cities was the Electric Home and Farm Authority, which provided electricity and gas and assistance in buying appliances to use these services. The mortgage company was affected as well since families were not able to make their payments. This led

11236-458: Was to finance projects like dams and bridges, and the money would be repaid by charging fees to use these structures. To help with unemployment, a relief program was created that would be repaid by tax receipts. The Presidency of Franklin D. Roosevelt increased the RFC's funding, streamlined the bureaucracy, and used it to help restore business prosperity, especially in banking and railroads. Roosevelt appointed Texas banker Jesse H. Jones to lead

#934065