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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?. Railroad, farming, coal were struggling, layoffs begin Congress tries to pass price controls, Coolidge vetoes.

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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. Railroad, farming, coal were struggling, layoffs begin • Congress tries to pass price controls, Coolidge vetoes • Easy credit causes massive consumer debt, 80% have no savings causing much of the public to stop buying Signs of Trouble in Late 20s • Income gap between the rich & poor was widening $5,000- 9,999(5%) $10,000 or more (1%) $2,000-$4,999 (29%) $1,999 or less (65%)

  3. Herbert Hoover Elected • Despite rising unemployment, Hoover states business will fix the problems itself – Discuss: Why could attitude be a problem? • Secy of Commerce Herbert Hoover easily wins election (Lassiez-Faire Republican) “We in America are nearer to the final triumph over poverty than ever before.”

  4. Bullish Stock Market • 1929: Dow Jones Industrial Average (measures overall stock price) had gone up every year in 1920s – 4 million invest • But many stocks bought on 1) speculation (buy risky stocks, for a quick profit) or 2) buy on margin (small down pymt, borrow rest)

  5. The Stock Market Crashes • $30 billion lost, panic ensues • 1929: Investors worry about unemployment, begin selling stock • Stock market plunges, Oct 29th “black Tuesday” 16.4 million shares were “dumped”, stock market loses 25% of its value

  6. Financial Collapse • By 1932, 90K businesses go bankrupt, unemployment rate jumps from 5% to 25%, US GNP drops 50% • People try to pull their remaining money out of bank, run on banks causes 11K of 25K banks to collapse

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