Ch 14 Sec 1 The Ch 14 Sec 1 The Nations Sick EconomyNations Sick Economy

Rising WealthRising Wealth

A Booming Stock A Booming Stock MarketMarket

A False Sense of A False Sense of faith in the faith in the economyeconomy

Essential QuestionsEssential Questions Why did the Why did the

economy economy appear appear healthy?healthy?

What danger What danger signs were signs were present in present in the economy the economy of the late of the late 1920’s?1920’s?

““Wonderful Prosperity”Wonderful Prosperity” In 1925 the value of the stock In 1925 the value of the stock

market was $27 billion, by market was $27 billion, by Oct.1929 it was $87 billion.Oct.1929 it was $87 billion.

Since 1914 workers’ wages Since 1914 workers’ wages rose 40%.rose 40%.

Unemployment averaged Unemployment averaged below 4%.below 4%.

John J.Raskob “Everybody John J.Raskob “Everybody Ought to be Rich.” $15 per Ought to be Rich.” $15 per wk, 20yrs.=$400mowk, 20yrs.=$400mo

Welfare CapitalismWelfare CapitalismBig companies launched strategies Big companies launched strategies

to meet workers demands.to meet workers demands.They could avoid union They could avoid union

intervention,intervention, strikes, and keep productivity high.strikes, and keep productivity high.Employers raised wages, and gave Employers raised wages, and gave

paid vacations, health plans, paid vacations, health plans, recreation programs, and even recreation programs, and even English classes for recent English classes for recent immigrants.immigrants.

Organized labor lost members in the Organized labor lost members in the 1920’s.1920’s.

Economic Danger SignsEconomic Danger Signs

Uneven distribution of wealth.Uneven distribution of wealth.

200 large companies controlled 200 large companies controlled

49% of industry.49% of industry.

0.1% controlled 34% of all 0.1% controlled 34% of all savings, with incomes over savings, with incomes over $100,000.$100,000.

71% earned less than $2,500 a 71% earned less than $2,500 a year.year.

80% of families had no savings.80% of families had no savings.

Personal DebtPersonal Debt

Installment Buying, buying Installment Buying, buying expensive items on creditexpensive items on credit..

Radios, Vacuum Cleaners, Radios, Vacuum Cleaners, Kitchen Appliances, Kitchen Appliances, Refrigerators, Cars, Tractors Refrigerators, Cars, Tractors and farm equipment.and farm equipment.

People believed future income People believed future income would cover debt.would cover debt.

Playing The Stock Playing The Stock MarketMarket

Americans in the 1920’s Americans in the 1920’s had a had a “Get Rich Quick”“Get Rich Quick” attitude.attitude.

Playing the Market Part Playing the Market Part IIII Stock SpeculationStock Speculation – High stock – High stock

prices encouraged Americans to prices encouraged Americans to make high-risk investments in make high-risk investments in hopes of high return.hopes of high return.

Ordinary Americans now bought Ordinary Americans now bought stock.stock.

Buying on Margin-Buying on Margin- Investors could Investors could purchase stock for only a fraction purchase stock for only a fraction of its price. (10 to 50%) and borrow of its price. (10 to 50%) and borrow the rest.the rest.

Brokers lent $, and as stocks rose $ Brokers lent $, and as stocks rose $ could be made and brokers paid could be made and brokers paid off.off.

Overproduction of Goods, Overproduction of Goods, Too Little DemandToo Little Demand

By the late 1920’s By the late 1920’s warehouses were warehouses were overstocked.overstocked.

There were more good than There were more good than consumers could buy.consumers could buy.

Auto industryAuto industry slumped after slumped after 1925.1925.

Housing ConstructionHousing Construction fell by fell by 25% between 1928 and 1929.25% between 1928 and 1929.

Trouble For Farmers and Trouble For Farmers and WorkersWorkers

About 6,000 About 6,000

Rural Banks failed.Rural Banks failed.

Farmers could notFarmers could not

pay off machinerypay off machinery

and mortgagesand mortgages..

No Help for Farmers and No Help for Farmers and WorkersWorkers

Mc-Nary- Haugen farm relief billMc-Nary- Haugen farm relief bill would have given farmers more $ would have given farmers more $ for crops. It was vetoed twice by for crops. It was vetoed twice by Pres. Coolidge.Pres. Coolidge.

No Price Supports!No Price Supports!

Factory workers, miners and Factory workers, miners and textile workers still worked long textile workers still worked long hours for little payhours for little pay especially in especially in rural areas.rural areas.

What signaled trouble in What signaled trouble in 1929?1929?

Uneven Distribution of WealthUneven Distribution of Wealth Rising Personal DebtRising Personal Debt Stock SpeculationStock Speculation Overproduction of goodsOverproduction of goods Hardships of Farmers and Hardships of Farmers and WorkersWorkers

Laissez-Faire Gov. Econ. Laissez-Faire Gov. Econ. PolicyPolicy