McGraw-Hill has a textbook, readily available in bookstores, entitled "The Complete Book of United States History" ("for grades 3 to 5"). I would hardly call this a complete history -- only major events are covered, and then not very completely. Still, I like to pull from a wide variety of sources on such objective topics as history, and my boys can only handle textbook information in small doses. The book's come in handy.
I have always believed -- from the first whisperings about the mortgage industry -- that our country cannot possibly continue operating in the way it has without serious ramifications. Our citizens (a/k/a our consumers) cannot keep living off of credit without some kind of consequences at some point. Credit should be for unusual circumstances in which you need more money upfront than you can get, but that you can, over time, repay. It is not for paying bills or buying stuff that you can't outright afford.
Alas, the shit is hitting the fan for many Americans.
So, while looking through my "Complete History" last night, searching for information about Jamestown and the Revolutionary era to share with the boys, I glanced at the book's unit entitled "A Time of Troubles." I knew there were similarities between what caused the Great Depression and what our country is facing now, but I hadn't realized just how many similarities there are. It's frightening. What's more frightening is trying to envision John McCain coming up with a modern New Deal or WPA. But I digress.
I'm going to post the relevant text from the book here (in parts) with occasional personal comments. Mostly, though, I just want you to read what happened in the 20's and 30's. Think about it. Comment if you feel compelled, or post your opinions on your own blog -- but at least think about it.
The Complete Book of United States History
[comments and emphasis mine]
Unit 9: A Time of Troubles -- Part 1
"The Great Depression"
In every economy, there are good times and there are bad times. A good time is called a boom. A bad time is sometimes called a depression.
The 1920s seemed like a boom time. [like the 1990s and early 2000s] But, times were not booming for everyone. New inventions helped increase the amount farmers could produce. However, farmers produced so much, that the prices of some crops dropped. This meant that, although farmers produced more, they often made less money. So, many farmers did not share in the boom of the 1920s.
During the 1920s, some people made a lot of money, but most did not. Those who wanted to buy things began buying on credit. That is, they gave some money at the time they made the purchase. Then, every month, they made a payment until the item was paid for.
People also began spending a lot of money to buy stocks. A stock is a share in the ownership of a company. People watched as stock prices doubled during the 1920s. They wanted a share of that wealth, too. For the same reason, many banks and businesses also bought stocks during this time.
The Stock Market Crashes
In October 1929, stock prices began to drop. They dropped again and again. On October 24, 13 million shares of stock were sold. On October 29, 16 million shares changed hands. Many, many people wanted to sell their stocks, but few wanted to buy. This caused the prices of stocks to drop even more. People were forced to sell their stocks for much less than the original prices. The people, businesses, and banks with money invested in the stock market lost a fortune that October.
In addition, businesses now found that no one had money to buy their products. To stay in business, they often had to fire workers. Other businesses had to close. By 1933, almost one of every four American workers had no job. Many who were still employed had to take pay cuts or work fewer hours.
Banks, too, were in deep trouble. Many people who had borrowed money from the banks now couldn't pay back that money. In the next few years, thousands of banks were forced to close their doors. People who had accounts in those banks lost all their savings.
[comments and emphasis mine]
Unit 9: A Time of Troubles -- Part 1
"The Great Depression"
In every economy, there are good times and there are bad times. A good time is called a boom. A bad time is sometimes called a depression.
The 1920s seemed like a boom time. [like the 1990s and early 2000s] But, times were not booming for everyone. New inventions helped increase the amount farmers could produce. However, farmers produced so much, that the prices of some crops dropped. This meant that, although farmers produced more, they often made less money. So, many farmers did not share in the boom of the 1920s.
During the 1920s, some people made a lot of money, but most did not. Those who wanted to buy things began buying on credit. That is, they gave some money at the time they made the purchase. Then, every month, they made a payment until the item was paid for.
People also began spending a lot of money to buy stocks. A stock is a share in the ownership of a company. People watched as stock prices doubled during the 1920s. They wanted a share of that wealth, too. For the same reason, many banks and businesses also bought stocks during this time.
The Stock Market Crashes
In October 1929, stock prices began to drop. They dropped again and again. On October 24, 13 million shares of stock were sold. On October 29, 16 million shares changed hands. Many, many people wanted to sell their stocks, but few wanted to buy. This caused the prices of stocks to drop even more. People were forced to sell their stocks for much less than the original prices. The people, businesses, and banks with money invested in the stock market lost a fortune that October.
In addition, businesses now found that no one had money to buy their products. To stay in business, they often had to fire workers. Other businesses had to close. By 1933, almost one of every four American workers had no job. Many who were still employed had to take pay cuts or work fewer hours.
Banks, too, were in deep trouble. Many people who had borrowed money from the banks now couldn't pay back that money. In the next few years, thousands of banks were forced to close their doors. People who had accounts in those banks lost all their savings.
Usually, depressions last for a year or two. [That's comforting...] The depression that began in 1929 lasted for over a decade. [...but that's not.] In fact, it lasted so long and was so bad that to this day, it is known as the "Great Depression."
During the Great Depression, thousands of families lost their homes, because they couldn't make their mortgage payments. All over the country, shantytowns sprang up where people built shelters from flattened tin cans and cardboard or car bodies or anything else they could find. Many called these shack cities [like the one outside of Las Vegas] "Hoovervilles," because they felt that President Herbert Hoover was partly to blame for their condition. [Um, "Bushvilles?"]
During the Great Depression, thousands of families lost their homes, because they couldn't make their mortgage payments. All over the country, shantytowns sprang up where people built shelters from flattened tin cans and cardboard or car bodies or anything else they could find. Many called these shack cities [like the one outside of Las Vegas] "Hoovervilles," because they felt that President Herbert Hoover was partly to blame for their condition. [Um, "Bushvilles?"]
People who didn't have jobs found there were no jobs to be had. Some became shoe shiners. Others sold apples on city streets. Still they starved. America was full of scenes such as the one a woman witnessed in a Chicago alley: "One vivid, gruesome moment of those dark days we shall never forget," she said. "We saw a crowd of some fifty men fighting over a barrel of garbage outside the back door of a restaurant. American citizens fighting for scraps of food like animals!"
The President Responds
Herbert Hoover was president during this time. He didn't believe the national government should help the people. He argued that in times like these, it was the responsibility of individuals to look after their neighbors. What individuals couldn't do, the local or state governments should do. The national government -- at least as long as Herbert Hoover was president -- would give aid only as a "last resort." According to the president, that time of "last resort" didn't come during his presidency. As a result, the national government offered little aid to the nation's overwhelmed states, cities, and citizens.
A Shameful Story
The President Responds
Herbert Hoover was president during this time. He didn't believe the national government should help the people. He argued that in times like these, it was the responsibility of individuals to look after their neighbors. What individuals couldn't do, the local or state governments should do. The national government -- at least as long as Herbert Hoover was president -- would give aid only as a "last resort." According to the president, that time of "last resort" didn't come during his presidency. As a result, the national government offered little aid to the nation's overwhelmed states, cities, and citizens.
A Shameful Story
One of the darkest days of the Great Depression happened in Washington, D.C., near the Capitol Building, where Congress meets. In the summer of 1932, fifteen thousand World War I veterans straggled into Washington. They were part of perhaps two million men who had lost almost everything since the depression began.
As veterans of the war, they were holders of bonus certificates. These certificates were to mature, or reach their full worth, in 1945. The veterans hoped to talk Congress into letting the certificates mature in 1932.
Congress voted not to advance the bonus money. So, most of the veterans went back to their home states. About two thousand, though, stayed in Washington. Many of these men had no homes they could return to. They set up places to live in a shantytown they built near the Capitol Building.
President Hoover worried that the two thousand veterans in the nearby shantytown might become violent. Plus, their presence was embarrassing to him. So, he told the U.S. Army to make the veterans leave the area.
On July 28, 1932, Chief of Staff Douglas MacArthur ordered the Army to scatter the veterans. Troops armed with tear gas, tanks, guns, and bayonets forced out the desperate, hopeless men, women, and children of the "Bonus Army." Then, the Army burned the shacks of their shantytown.
Later, General MacArthur defended his actions. He said that the veterans were a bunch of "riotous elements." Regardless of what he said, many Americans were furious with his and President Hoover's treatment of people who had faithfully served their country during World War I. The Washington News spoke for many when it said, "What a pitiful spectacle is that of the great American Government, mightiest in the world, chasing unarmed men, women, and children with Army tanks. ... If the army must be called out to make war on unarmed citizens, this is no longer America."
Many Americans had become frustrated with President Hoover's failure to end the depression. Many, too, were horrified by his treatment of the veterans in Washington. A cry went out for new leadership for this difficult times.
Next, Part 2: Franklin Roosevelt's New Deal
As veterans of the war, they were holders of bonus certificates. These certificates were to mature, or reach their full worth, in 1945. The veterans hoped to talk Congress into letting the certificates mature in 1932.
Congress voted not to advance the bonus money. So, most of the veterans went back to their home states. About two thousand, though, stayed in Washington. Many of these men had no homes they could return to. They set up places to live in a shantytown they built near the Capitol Building.
President Hoover worried that the two thousand veterans in the nearby shantytown might become violent. Plus, their presence was embarrassing to him. So, he told the U.S. Army to make the veterans leave the area.
On July 28, 1932, Chief of Staff Douglas MacArthur ordered the Army to scatter the veterans. Troops armed with tear gas, tanks, guns, and bayonets forced out the desperate, hopeless men, women, and children of the "Bonus Army." Then, the Army burned the shacks of their shantytown.
Later, General MacArthur defended his actions. He said that the veterans were a bunch of "riotous elements." Regardless of what he said, many Americans were furious with his and President Hoover's treatment of people who had faithfully served their country during World War I. The Washington News spoke for many when it said, "What a pitiful spectacle is that of the great American Government, mightiest in the world, chasing unarmed men, women, and children with Army tanks. ... If the army must be called out to make war on unarmed citizens, this is no longer America."
Many Americans had become frustrated with President Hoover's failure to end the depression. Many, too, were horrified by his treatment of the veterans in Washington. A cry went out for new leadership for this difficult times.
Next, Part 2: Franklin Roosevelt's New Deal
1 comment:
So I read one of your posts and then another and another and now it's quarter to 12 and I really need to quit! As a (former) Financial Advisor I appreciate the recap of the 1929 crash. The most important part of the lesson is the margin loans that were allowed then (though I'm not sure how the typical 3rd-5th graders would grasp this). Only 10% down was required to buy back then whereas you need 50% now. The tricky part is when the price drops below the amount of your margin you must sell your stock to pay for your loan or put up cash. As you said, if everyone's selling there are not many folks left to be on the buying end and you need twice as much to keep your head above water, oh and don’t forget the interest that you need to pay as well. There are lots of sites out there to explain the in depth version of how margin loans work and what part they played in the crash of 10/29/29. Or let me know and I’ll bring my white board to the next MNO :)
Post a Comment