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The Nation’s Sick Economy

The Nation’s Sick Economy. What caused the economy to go bad at the end of the 1920s?. Several industries were struggling at the end of the 1920s Railroad was losing business due to cars/planes Coal mining was down due to electricity/oil Lumber industry suffers due to less houses being built.

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The Nation’s Sick Economy

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  1. The Nation’s Sick Economy What caused the economy to go bad at the end of the 1920s?

  2. Several industries were struggling at the end of the 1920s Railroad was losing business due to cars/planes Coal mining was down due to electricity/oil Lumber industry suffers due to less houses being built Signs of Trouble vs vs • Farming also in trouble - Crop prices rose after WW I, so farmers grew more crops, causing prices to fall - Farmers can’t pay debt to banks, banks seize farms/equipment, Congress tries to pass price-supports but Coolidge vetoes Film Clip Question:

  3. People were buying too many things on credit in the mid-20s, creating massive consumer debt • Late 20s: Consumers were buying less because prices were rising, while wages were not (inflation) Faltering Economy • Income gap between the rich & poor were widening • 80% of Americans did not put money into savings

  4. Herbert Hoover Elected • Despite warning signs & unemployment, Hoover states business will fix issue with the economy • Wins because Republicans ruled over prosperous 20s • Hoover runs as a Laissez-Faire Republican (similar to Coolidge) “We in America are nearer to the final triumph over poverty than ever before.”

  5. Booming Stock Market • 1929: 4 million Americans have invested in the stock market • The Dow Jones Industrial Average (which measure overall stock price) had risen throughout the 1920s • Many wanted to make money in the “bull market” so many investors use speculation (buying risky stocks & bonds to make a quick profit) • Many also buying on margin: paying a small % of a stock’s • price as a down payment and borrowing for the rest.

  6. The Stock Market Crashes • Investors worry about economy, begin selling stock • Stock market plunges on Oct. 24th “Black Tuesday” • By Oct 29th 16.4 million shares were “dumped” • People who had bought on margin now have a huge debt & worthless stock ●Total investments lost = $30 billion, panic ensues

  7. Financial Collapse • 1929-1932: 90,000 businesses go bankrupt • People try to pull their remaining money out of the banks • Run on banks causes banks to fail • By 1933 11,000 of 25,000 banks had collapsed • US GNP (amount of goods & services produced) is cut in half • People stop buying, businesses start laying off employees - From 1929-1933: Unemployment rate goes from 3% to 25%

  8. Hawley-Smoot Tariff Act • Congress raises tariffs to protect American farmers and manufacturers • Plan backfires as Europe can’t afford to buy American products • Worldwide trade drops 40%, worldwide depression on the rise

  9. Causes of the Depression • An unequal distribution of income. • New technology hurt many industries • Too much debt due to easy credit. • People gamble on stock market • Banks fail • Tariffs hurt American goods worldwide What do you mean the roaring 20s are over??

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