CHAPTER 14 SECTION 1CHAPTER 14 SECTION 1THE NATIONS SICK THE NATIONS SICK

ECONOMYECONOMY

MAIN IDEA:MAIN IDEA:As the prosperity of the As the prosperity of the

1920s ended, severe 1920s ended, severe economic problems economic problems gripped the nation.gripped the nation.

ECONOMIC TROUBLES ON ECONOMIC TROUBLES ON THE HORIZONTHE HORIZON

Superficial prosperitySuperficial prosperity Basic industries barley made Basic industries barley made

profitprofit Coal mining hit hard b/c of new Coal mining hit hard b/c of new

forms of energy (hydroelectric forms of energy (hydroelectric power, fuel oil, natural gas)power, fuel oil, natural gas)

Automobile industry weakenedAutomobile industry weakened The number of houses being built The number of houses being built

fellfell

Farmers Need A LiftFarmers Need A Lift Agriculture suffered the mostAgriculture suffered the most WWI prompted farmers to WWI prompted farmers to

take out loans for land and take out loans for land and equipmentequipment

Demand fell after warDemand fell after war Crop prices decline by 40% Crop prices decline by 40%

or moreor more 1919-1921 annual farm 1919-1921 annual farm

income declined from $10 income declined from $10 billion to $4 billionbillion to $4 billion

FARMERSFARMERSMcNary-Haugen bill-PMcNary-Haugen bill-Price rice SupportsSupports for wheat, corn, for wheat, corn, cotton and tobaccocotton and tobacco

Price Support-Price Support-government buys a government buys a surplus of goods at a surplus of goods at a fixed price and sells then fixed price and sells then on the world marketon the world market

Consumers Have Less Consumers Have Less Money To SpendMoney To Spend

Americans buy less because:Americans buy less because:– Rising pricesRising prices– stagnant wages stagnant wages – Unbalanced distribution of Unbalanced distribution of

income income – Overbuying on creditOverbuying on credit

LEADS TO…GAP BETWEEN LEADS TO…GAP BETWEEN RICH AND POORRICH AND POOR

– Look at page 466 in your texbookLook at page 466 in your texbook

LIVING ON CREDITLIVING ON CREDIT CREDIT-an arrangement in CREDIT-an arrangement in

which consumes agreed to which consumes agreed to buy now and pay later for buy now and pay later for purchasespurchases

Credit easily availableCredit easily available Businesses encouraged Businesses encouraged

Americans to pile up large Americans to pile up large consumer debtconsumer debt

Uneven Distribution of Uneven Distribution of WealthWealth Rich got richer…poor got poorerRich got richer…poor got poorer

In come of wealthiest 1 percent In come of wealthiest 1 percent of population rose by 75%of population rose by 75%

9% increase for Americans as a 9% increase for Americans as a wholewhole

70% of the nation’s families 70% of the nation’s families earned less than 2,500 per yearearned less than 2,500 per year

Average person bought one Average person bought one new clothes outfit a yearnew clothes outfit a year

1 in 10 city homes had an 1 in 10 city homes had an electric refrigerator electric refrigerator

Hoover Takes the NationHoover Takes the Nation1928 Election Republican 1928 Election Republican Herbert Hoover vs. Herbert Hoover vs. Democrat Alfred E. SmithDemocrat Alfred E. Smith

Hoover won with an Hoover won with an overwhelming victoryoverwhelming victory

Message was clear: Message was clear: Americans were happy Americans were happy with Republican leadershipwith Republican leadership

Dreams of Riches in the Dreams of Riches in the Stock MarketStock Market

Stock market the most visible Stock market the most visible sign of a prosperous American sign of a prosperous American EconomyEconomy

Dow Jones IndustrialDow Jones Industrial- measure - measure based on the stock prices of 30 based on the stock prices of 30 representative large firms representative large firms trading in the NY Stock trading in the NY Stock ExchangeExchange

Barometer of stock market’s Barometer of stock market’s healthhealth

Stock MarketStock Market Dow reached a high of 381 points (300 Dow reached a high of 381 points (300

points higher than 5 years earlier)points higher than 5 years earlier) ““Bull Market”-a period of rising stock Bull Market”-a period of rising stock

pricesprices 1929 4 million Americans-3% of the 1929 4 million Americans-3% of the

nation’s population owned stocknation’s population owned stock SpeculationSpeculation- buying stocks and bonds - buying stocks and bonds

on the chance of quick profiton the chance of quick profit Buying on CreditBuying on Credit- paying a small - paying a small

percentage of a stock’s price as a percentage of a stock’s price as a down payment and borrowing the restdown payment and borrowing the rest

THE STOCK MARKET CRASHESTHE STOCK MARKET CRASHES Black Tuesday-October 29-the Black Tuesday-October 29-the

bottom fell out of the marketbottom fell out of the market Shareholders frantically tried to Shareholders frantically tried to

sell before prices plunged lowersell before prices plunged lower People who bought stocks on People who bought stocks on

credit were stuck with huge debts credit were stuck with huge debts Others lost their savingsOthers lost their savings Investors lost about $30 billion by Investors lost about $30 billion by

mid-November=how much mid-November=how much American spent in WWIAmerican spent in WWI

FINANCIAL COLAPSEFINANCIAL COLAPSE Great Depression-1929-1940 economy Great Depression-1929-1940 economy

plummeted and unemployment plummeted and unemployment skyrocketedskyrocketed

Banks failed and people could not get Banks failed and people could not get their money because the bank had their money because the bank had invested in the stock marketinvested in the stock market

1929-600 banks closed1929-600 banks closed 1932-11,000 of the nation’s 25,000 1932-11,000 of the nation’s 25,000

banks failedbanks failed Unemployment leaped from 3% to 25%Unemployment leaped from 3% to 25% 1 out of every 4 workers was out of a 1 out of every 4 workers was out of a

jobjob

World Wide Shock WavesWorld Wide Shock Waves Europe suffered from high war debtsEurope suffered from high war debts Great Depression compounded the Great Depression compounded the

problems b/c it limited America’s problems b/c it limited America’s ability to import European goodsability to import European goods

HAWLEY SMOOT-TARIFFHAWLEY SMOOT-TARIFF: 1930; : 1930; Established the highest protective Established the highest protective tariff in the U.S.tariff in the U.S.

Tariff made unemployment worseTariff made unemployment worse Countries retaliated by placing their Countries retaliated by placing their

own tariffsown tariffs

Causes of the Great Causes of the Great DepressionDepression

1.1. Tariffs and war debts Tariffs and war debts policies cut down foreign policies cut down foreign marketsmarkets

2.2. A crisis in the farm sectorA crisis in the farm sector3.3. Availability of easy creditAvailability of easy credit4.4. Unequal distribution of Unequal distribution of

wealth & incomewealth & income

Factors led to a falling Factors led to a falling demand for consumer goodsdemand for consumer goods