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Crash Course 33 - The Great Depression

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Material corresponding with BTP Chapter 22

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hi I'm John Green this is Crash Course u.s. history and Herbert Hoover's here which is never a good sign my favorite topic economics and inaccurate naming convention which was only great if you enjoy like being a hobo or selling tensile there's no real consensus about the Great Depression in simple declarative statements of bounded really say much more about you than they do about history anything I thought it because me from the past you always want things to fit into this simplistic narrative she loves me she loves me not the Great Depression was caused by x-ray was caused by why it's complicated people tell you that the gray Depression started with the stock market crash in October 1929 with ain't that isn't true and B it leads people to mistake correlation with cause what we think of as the Great Depression after the stock market crash but not because of like as we saw last week the underlying economic conditions in the US before the stock market crash weren't all moonshine and rainbows the 19 featured large-scale domestic consumption of relatively new consumer products which was good for American industry but much of this consumption was fueled by credit and installment buying which Isaac turned out was totally unsustainable economic uncertainty increases at which point has the technical historian term by the way of War one to provide food for all those soldiers and second the expansion led many farmers to mechanize their operation you'll know if you've ever bought a tractor conceived in so many farmers went into debt to finance their expansion and then a combination of overproduction and low prices meant that often their Farms were foreclosed upon other signs of economic disappeared throughout the decade like by 1925 the growth of car manufacturing slowed along with residential construction and worst of all with what noted left-wing radical Herbert Hoover labeled in play of mad speculation in the stock markets that began in 1927 by the way I'm getting about him being a left-wing radical you just look at it according to historian David Kennedy by 19 what time commercial Bankers were in the unusual position of loaning more money for stock market and real estate Investments then for commercial Ventures if we would ever find ourselves in that position I know right we did in 2008 stock market crash and the depression were not the same thing a lot of rich people lost money in the market but what made the Great Depression the Great Depression was massive unemployment and accompanying hardship and this didn't actually begin until like 1930 or 1931 the end of 1929 was actually okay unless you were a farmer stop broker obviously caused the depression while that's a big question and it's one that Economist have struggled with ever since they want to find out so they can keep it from ever happening again refresher Economist only 3% of Americans actually owned stock in the markets recovered a lot of their value by 9:30 although they did then go down again because you know there was a depression Nexen corporations were buying a lot of stock much of it was with borrowed money known as margin buying and all of that still was not nearly a big enough Iceberg to sync the world's economy but play the name of single cause of the Great Depression it might be America's weak banking system all right let's go to the Marcus Banks were small individual institutions that had to rely on their own resources when there was a panic and depositors rush to take money out of the bank like they do in the obscure arthouse movie Mary Poppins the bank went under if it didn't have enough money on reserve bank failures began in Indiana Illinois Missouri eventually Arkansas in North Carolina as depositors lined up to take their money out before the banks went belly-up Banks called in loans and sold assets ultimately this add credit froze up which was what really destroyed the economy of Frozen credit system method less money was in circulation and that led to deflation now you're probably thinking big deal deflation is bad as inflation is much worse as anyone who has ever slept on an air mattress workers these workers then can't buy anything so inventories continue to build up and prices drop further Banks weren't lending money so employers couldn't borrow it to make payroll 2 their workers and more and more businesses went bankrupt leaving more and more workers unable to purchase the goods and services that would keep the businesses open so if we have to lay the blame for the great to turn on someone we can blame the banks which isn't completely wrong and it gives us a chance to shake our fists at Andrew Jackson who's distrust of Central Banking got us into this mess in the play Seth probably too simple but the Federal Reserve does deserve a good chunk of the blame for not rescuing the banks and not infusing money into the economy to combat this deflationary thanks. Couple so economics fans out there might be saying why didn't the Hoover administration engage in some good old-fashioned Keynesian pump-priming the government's do turn scale economic stimulus in a bunch of infrastructure projects you can kind of create a bottom that stops the deflation Airy cycle and that does often work but unfortunately the Hoover administration not have a tardis great work the general theory of employment interest and money he wasn't very good at titles wasn't published until 1936 when the Depression was well underway entering into the green nightmare of not America for a moment explanation in his Memoirs for the global phenomenon that was the Great Depression what's was World War 1 & 2 be fair the war did set the stage for a global economic disaster because of the web of debts and reparations to the Creator add to pay 33 billion dollars in reparations mostly to France and Britain which it couldn't pay without borrowing money from American banks in addition the US itself was on 10 $10 by Britain and France some of those countries paid back with German reparations American Credit dried up as it did in the wake of the stock market crash in the American bank then the economies of Germany France and Britain also fell off a cliff and then with the largest non-us industrial economies and total turmoil fewer people abroad could buy a merry products are French wine or Brazilian coffee and World Trade came to a halt and then we needed was more trade America responded by raising Tudor highest levels ever with the hawley-smoot Tariff a law that was as bad as it sounds it's to protect American industry but since Europe responded your own high Terrace that just met that they were fewer buyers for American Goods less trade fewer sales and ultimately fewer job so what did Hoover do not enough it's morning to remember that the American government is not just the President Hoover couldn't always get Congress to do what he wanted but his political ineptitude was not particularly surprising because the first elected office that he ever held in his life was President of the United States what Congress to go along with it but it wasn't enough mainly because the central Bankers in Europe and America refuse to let go of the gold standard which would have allowed the government studi play the currency and pump needed money into their economy and when Britain rather heroic we I might add did abandoned the gold standard in 1931 and stop payments in Gold the US did follow suit which meant that world financial markets froze up even further like a little bit complicated but if you and I have always use Cheetos as currency to exchange goods and services in one day I am we can't really do that anymore because it doesn't give us the flexibility that we need to pull ourselves out of this deflation air espiral I don't also agree to abandon she does and it's going to be a total disaster which it was even worse the FED raised its discount rate making credit even harder to come by by the end of 1931 2294 American Banks failed double the number that have gone under in 1932 stop the Great Depression our knowledge of what happened afterward the New Deal Franklin Delano Roosevelt at least trying to do something about the depression makes us forget that when Hoover was President orthodox political an economic theory counseled in favor of doing nothing I noticed Hoover didn't follow the advice of his treasury secretary who according to Hoover anyway argue that the solution was to liquidate labor liquidate stocks liquidate the farmers liquidate real estate which sounds like the worst milkshake ever have government to Cushing the situation and in a White House meeting he persuaded a large number of industrialist to agree to maintain wage rate he also got the federal Farm board turn down cultural production and got Congressional approval for 140 million dollars in new Public Works overall he nearly doubled the federal Public Works expenditures between 1929 add 1931 it just wasn't nearly enough for the federal government to take over the situation completely he relied primarily on private is in state and local governments to stimulate the economy and that was insufficient it's not surprising when you consider that in 1929 Federal expenditures accounted for 3% are gross domestic product today it's more like 20% to is just really hard to imagine the federal government doing anything on such a large scale to address a national because it had never really done that much before also hiked taxes as part of a plan to stabilize the banks by balancing the federal budget providing confidence for foreign creditors and stopping them from buying American Gold this would support bonds and also keep the federal government out of competition with private borrowers the Revenue Act of 1932 Congress buddy didn't do much to stop the depression in fact arguably it made it worse situation for Hoover into a truly radical move in January 19th 32 he and Congress created the Reconstruction Finance Corporation which was basically a federal bailout program that borrowed money to provide Emergency Loans to Banks building in loan societies railroads and agricultural corporations wasn't enough and the Great Depression started to take early 1932 well over 10 million people were out of work 20% of the labor force in big cities the numbers were even worse especially for people of color like Chicago 4% of the population was African-American but they made up more than 16% of the unemployed although who famously claimed that no one starved can eat cake e people did search trash cans for food and many Americans were forced to ask for Relief response was to try to encourage private charity through the tell me acronym presidents organization on unemployment relief or poor 1832 and private charitable giving deed increase from 4.5 million to 21 million and that sounds great Until you realize that the total of 79 million dollars New York City spent on relief in 1932 was less than 1 month lost wages for the 800,000 people who were unemployed now it's time for the mystery document break from the unrelenting misery  probably not the rules here are simple I guess the author the mystery document and then usually fail and gets shocked with the shock pen witch whale shark pet no matter what you people say right when we got here we sit looking at the floor no one dares think of the coming winter there are only a few more days of summer just to get work to lay up something for that long Siege of bitter cold but there is no work sitting in the room we all know it this is why we don't talk much we look at the floor waiting to see that knowledge in each other's eyes there is a kind of humiliation in it we look away from each other we look at the floor it's too terrible to see this animal error in each other's eyes unemployment was 25% and this could be literally any of those people I'm going to guess that it's a woman on the road sing to find work while women would go to these offices to look I mean Janet Smith in the case of the hardships experienced during the Great Depression if Willie is pictures of Dorothea Lange and Walker Evans and Steinbeck's description in The Grapes of Wrath of Okies leaving the Dust Bowl in the usually vain hope of a better life in California they tell the story better than I can first student red lines they were shantytowns for the homeless called Hoovervilles and there were protests like the bonus March on Washington by veterans seeking an early payment of a bonus due to play 1945 around the Great Depression revolves around the causes while still more concerns the degree to which the federal government's eventual response the New Deal actually help end the Depression whose questions are controversial because they're still relevant we're still talking about how to regulate Banks what the government role in Economic Policy should be in whether a strong federal government is ultimately good for an economy or bad for it how you feel about the government's role in the Great Depression is going to depend on how you feel about government in general didn't that are ideological feelings about markets and governments and economics obscure the suffering that millions of Americans experienced during the Great Depression for Generations reckons it was one of the defining experiences of their lives thanks for watching I'll see you next week please nice people and it is possible because of your support through syllables give the show on a monthly basis through several there's a link in the info if you'd like to join those subscribers superx and stuff but mostly educational video available for free to everyone forever thank you for watching and supporting crash course in this say my hometown don't forget to be awesome

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Crash Course 33 - The Great Depression

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