The Great Depression

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How did President Hoover's policies worsen the Great Depression, and how did the New Deal transform the economy?

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President Hoover's policies worsened the effects of the Great Depression by instilling a distrust of the government in the American people. The public was fed up with Hoover's lack of action in taking care of the people after the economic collapse.

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The immediate cause of the Great Depression was the stock market collapse of 1929. That event marked the beginning of a long, profound, and painful economic decline. However, there were underlying causes that were just as important. The economy of the twenties, seemingly very robust, had a number of underlying weaknesses. One of these was extremely unequal income distribution. Far too much of the nation's wealth was in the hands of a few. Cash-strapped consumers relied too heavily on installment plans to purchase cars and consumer products. Also, farmers did very badly during the twenties, as they struggled with debt and low crop prices. Finally, banks and the stock market were not well regulated.

As economic conditions rapidly deteriorated after 1929, the public became dissatisfied with the response of President Herbert Hoover. Slums became known as Hoovervilles. In 1932, thousands of desperate World War I veterans descended on Washington to seek a bonus for their military service. Hoover callously sent in soldiers to destroy the protesters' camps. Hoover did set up the Reconstruction Finance Corporation (RFC), but it was too little and too late. Hoover was crushed by Franklin Delano Roosevelt in the presidential election of 1932.

In 1933, President Roosevelt launched his New Deal to combat the Great Depression. His array of measures was designed to alleviate economic suffering and stimulate the moribund economy. He reassured an anxious and downtrodden public with regular "fireside chats." The New Deal was partially successful, and FDR is widely regarded as one of the greatest presidents.

Another depression could begin in 2020. Wealth distribution in America is as uneven now as it was in the twenties. Wall Street is still not regulated well enough. Too many consumers are in debt, and farmers are struggling.

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