When Economic Bubbles Burst

Following a decade of economic growth that featured a bubble of easy money and over-speculation in stocks and land, Wall Street crashed on Black Thursday in October 1929.

The Great Depression soon spread across the country and around the world. Banks and businesses went bust and people tried to hoard their money rather than invest or spend it--further slowing the economy. As the Depression worsened, millions of people lost their jobs, homes, and possessions.

The unemployment rate reached 27 percent, but President Herbert Hoover maintained that it was not the federal government's responsibility to provide relief. Critics attacked Hoover for his insistence on balancing the federal budget and his claim that "Prosperity is just around the corner." Franklin Roosevelt defeated Hoover in the 1932 presidential election, assuring Americans in his inaugural address that "We have nothing to fear but fear itself."

Seventy-five years ago, on March 9, 1933, Roosevelt called a special session of Congress known as the "100 days." This launched the start of FDR's series of bold new economic reforms dubbed the "New Deal."

Today, similar to the Stock Market Crash of 1929, the U.S. is experiencing economic bubble bursting. This time the causes are the sub-prime mortgage lending abuses, land and housing speculation, and "innovative" and complex banking and bond financing schemes.

As in other bubbles in the past, the regulatory power of the government, some of it created during the New Deal, was not exercised and allowed business to reign unchecked. Now, just as FDR did 75 years ago, President Bush is now launching an economic "surge" of consumer and business spending incentives to help prevent the sustained pessimism of fear that could trigger another cyclical but deeper recession.

Students should be able to see parallels between the causes of Great Depression, the reforms that FDR launched, and the causes of and the remedies proposed for our current economic woes. After all, they will help shape the economic policies and strategies of future government fiscal and monetary policies intended to prevent new bubbles from happening.

Assign students to write a report of about 200 words, using at least three of the resources found through these pathfinders:

• Click Topics tab, then select The Great Depression.
  
  
• Click Stock Market Crash.
  
  
• Click Hundred Days.
  
  
• Click New Deal.

The report should address at least three of the essential questions below for critical thinking (you may want to add or substitute your own):

• What were the causes of the Stock Market Crash?
  
  
• Why weren't any of these causes addressed by the government before it was too late?
  
  
• What economic reforms of FDR proved to be the most effective and why?
  
  
• How did these reforms help to lead the U.S. out of the depression?
  
  
• Which of these reforms continues to impact our economy today?
  
  
• What would your economic "surge" include if you were President Bush and why?

Here is a new ProQuest model that students can use for their written reports.

PowerPoint reports (model 1 and 2) are a recommended alternative way for students to express their knowledge and reasoned opinion--limit: three minutes. This method provides students with an opportunity to share with their peers. It also provides an opportunity for students to be questioned to validate their research and limit plagiarism--limit of two questions. It also helps students to develop standards-based language arts presentation skills.