Thread by @gautam_icma

USA 1929 to 1936 (A Thread) Comments welcome.
US economy was faltering at every stage, common people were unhappy jobs were few and far to be found and the products could not find consumers.

The stock market defied gravity of the situation. It moved one way and that was up.
Market crashed from historic high of 386 to 195 in just two months. It was not the end. It was the beginning of “THE GREAT DEPRESSION”.

Post crash till April 1930 ……. For the benefit of viewers I have added 30 (blue) 50 (green) and 200(black) SMA. Till 16th April 1930, it retraced to the 200 SMA.
The unemployment rate a lagging indicator was still just 3.2 percent.

There were 650 bank failures. As banks failed, it reduced the money supply because there was less credit available. That meant each dollar was worth more. As the value of the dollar rose, prices fell. That reduced revenue for businesses.

It also meant that debt now cost more for lenders to pay back. That created a ripple effect of personal and business bankruptcies.

June to October 1930.
President Hoover signed the Smoot-Hawley Tariff Act.
It raised taxes on 900 imports. It originally was supposed to help farmers but ended up imposing tariffs on hundreds of other products.

Other countries retaliated, setting off a TRADE WAR. As a result, international trade began to collapse.
To make matter worse drought known as (Dust Bowl drought) hit USA in 1930.

On 9th October 1930 Dow broke the low of 195 which was last registered on 13th Nov 1929 during the crash a year ahead.

November & December 1930
Several big banks like Bank of Tennessee, Bank of the United States failed. With it failed their subsidiaries. Depositors rushed to withdraw their money from banks. This led to failure of more banks as they usually had 10% of deposits.

The rest was lent to others in form of loan to corporate, individuals as well as government. By the end of the year, 1,300 banks had failed.
The economy shrank and unemployment which was at 3.5 in the early part of the year rose to 8.7

1931
The crash of 1929 was having far reaching effects. Unemployment doubled to 16.3%.
The drought continued, hitting eight Southern states the worst.
By the end of 1931 almost banks 2500 had failed.

1932 (January to July)
Reconstruction Finance Corporation was created to lend $2 billion to financial institutions to prevent further failures.
The Fed purchased $1 billion in securities from banks as part of its open market operations.

That added liquidity to cash-strapped banks.
Economy shrank 27 percent since its peak in August 1929.
The top level income tax rate was increased to 63 percent to prevent federal deficit. Higher taxes worsened the Depression.

July 8: Dow bottomed at around 40.

August ---December 1932
Bank failures slowed, construction contracts increased 30 percent, and department store sales rose 8 percent.
The economy shrank 12.9 percent, unemployment rose to 23.6 percent.

1933
USA got a new president, Franklin Delano Roosevelt. President Hoover resorted to his pastime hobby fishing. It is said he wrote an article relating human behavior in market with fishes (Perhaps we call them “murga” or uneducated investor)

President Roosevelt took a series of steps for the economy to revive.
March 9: The Emergency Banking Act and “The New Deal” protected US banks from devastating failures.
The government cut its own spending to finance the New Deal and to help out banks.

Prohibition, ban on the production, importation, transportation, and sale of alcoholics, imposed in 1920 was lifted.
19th April: Roosevelt ordered everyone to exchange private gold for dollars.

The steps taken covered farmers, build power stations in poorest areas of the country, educating investors in stocks, home owners loans were refinanced.
Creation of jobs in industry was focused. Minimum wage was introduced and child labor was banned.

Farmers went to the extent of slaughtering pigs to reduce supply and increase demand.(This step was widely criticized)
The economy shrank 1.3 percent. Unemployment rose to a record 24.9 percent. Prices rose 0.8 percent. The national debt was $23 billion.

1934
The Gold Reserve Act prohibited private ownership of gold and doubled its price.
The dust bowl drought was still severe. Roosevelt passed the Soil Conservation Act to teach farmers sustainable methods.

The Federal Housing Administration provided Federal mortgage insurance. The Securities and Exchange Commission regulated the stock market.
The FCC consolidated all federal regulation of telephone, telegraph, and radio communications.

The economy grew 10.8 percent in response to the New Deal Programs. Unemployment fell to 21.7 percent. Prices rose 1.5 percent. The debt rose to $27 billion.
The steps taken by US Government were improving the economy.

However stock market which had run ahead of time traded in a zone.

1935
Roosevelt launched more programs focused on the poor, the unemployed, and farmers.
The Rural Electrification Act helped farms to generate electricity for their areas.
The Resettlement Administration trained and provided loans to farmers.

The Social Security Act provided income to the elderly, the blind, the disabled, and children in low-income families. It was paid for with payroll taxes and the Social Security Trust Fund.

Economy grew 8.9 percent. Unemployment fell to 20.1 percent. Prices rose 3.0 percent. The debt rose to $29 billion.

1936
Roosevelt raised the top tax rate to 79 percent. The economy grew 12.9 percent. Unemployment shrank to 16.9 percent. Prices rose 1.4 percent. The debt grew to $34 billion.
President Roosevelt was reelected.

Well, depression was not yet officially over. Dow was still 50% lower in value from the September 1929 peak. However Dow ended at 179 in 1936 which was quite high with respect to 1932 trough of 40.

Adding to it the world was at uneasy peace with Germans. Hitler was only growing in strength day by day. But that is another story to tell. Perhaps next time.