CHAPTER 14 SECTION 1 THE NATIONS SICK ECONOMY

1. CHAPTER 14 SECTION 1THE NATIONS SICK ECONOMY MAIN IDEA: As the prosperity of the 1920s ended, severe economic problems gripped the nation.

2. ECONOMIC TROUBLES ON THE HORIZON • Superficial prosperity • Basic industries barley made profit • Coal mining hit hard b/c of new forms of energy (hydroelectric power, fuel oil, natural gas) • Automobile industry weakened • The number of houses being built fell

3. Farmers Need A Lift • Agriculture suffered the most • WWI prompted farmers to take out loans for land and equipment • Demand fell after war • Crop prices decline by 40% or more • 1919-1921 annual farm income declined from $10 billion to $4 billion

4. FARMERS • McNary-Haugen bill-Price Supports for wheat, corn, cotton and tobacco • Price Support-government buys a surplus of goods at a fixed price and sells then on the world market

6. Consumers Have Less Money To Spend • Americans buy less because: • Rising prices • stagnant wages • Unbalanced distribution of income • Overbuying on credit LEADS TO…GAP BETWEEN RICH AND POOR • Look at page 466 in your texbook

7. LIVING ON CREDIT • CREDIT-an arrangement in which consumes agreed to buy now and pay later for purchases • Credit easily available • Businesses encouraged Americans to pile up large consumer debt

8. Uneven Distribution of Wealth • Rich got richer…poor got poorer • In come of wealthiest 1 percent of population rose by 75% • 9% increase for Americans as a whole • 70% of the nation’s families earned less than 2,500 per year • Average person bought one new clothes outfit a year • 1 in 10 city homes had an electric refrigerator

9. Hoover Takes the Nation • 1928 Election Republican Herbert Hoover vs. Democrat Alfred E. Smith • Hoover won with an overwhelming victory • Message was clear: Americans were happy with Republican leadership

10. Dreams of Riches in the Stock Market • Stock market the most visible sign of a prosperous American Economy • Dow Jones Industrial- measure based on the stock prices of 30 representative large firms trading in the NY Stock Exchange • Barometer of stock market’s health

11. Stock Market • Dow reached a high of 381 points (300 points higher than 5 years earlier) • “Bull Market”-a period of rising stock prices • 1929 4 million Americans-3% of the nation’s population owned stock • Speculation- buying stocks and bonds on the chance of quick profit • Buying on Credit- paying a small percentage of a stock’s price as a down payment and borrowing the rest

12. THE STOCK MARKET CRASHES • Black Tuesday-October 29-the bottom fell out of the market • Shareholders frantically tried to sell before prices plunged lower • People who bought stocks on credit were stuck with huge debts • Others lost their savings • Investors lost about $30 billion by mid-November=how much American spent in WWI

14. FINANCIAL COLAPSE • Great Depression-1929-1940 economy plummeted and unemployment skyrocketed • Banks failed and people could not get their money because the bank had invested in the stock market • 1929-600 banks closed • 1932-11,000 of the nation’s 25,000 banks failed • Unemployment leaped from 3% to 25% • 1 out of every 4 workers was out of a job

17. World Wide Shock Waves • Europe suffered from high war debts • Great Depression compounded the problems b/c it limited America’s ability to import European goods • HAWLEY SMOOT-TARIFF: 1930; Established the highest protective tariff in the U.S. • Tariff made unemployment worse • Countries retaliated by placing their own tariffs

18. Causes of the Great Depression • Tariffs and war debts policies cut down foreign markets • A crisis in the farm sector • Availability of easy credit • Unequal distribution of wealth & income Factors led to a falling demand for consumer goods