CHAPTER 14 SECTION 1 THE NATIONS SICK ECONOMY

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CHAPTER 14 SECTION 1THE NATIONS SICK ECONOMY

• MAIN IDEA
• As the prosperity of the 1920s ended, severe
  economic problems gripped the nation.

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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

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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

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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

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Consumers Have Less Money To Spend

• Americans buy less because
• Rising prices
• stagnant wages
• Unbalanced distribution of income
• Overbuying on credit
• LEADS TOGAP BETWEEN RICH AND POOR
• Look at page 466 in your texbook

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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

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Uneven Distribution of Wealth

• Rich got richerpoor got poorer
• In come of wealthiest 1 percent of population
  rose by 75
• 9 increase for Americans as a whole
• 70 of the nations 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

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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

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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 markets health

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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 nations
  population owned stock
• Speculation- buying stocks and bonds on the
  chance of quick profit
• Buying on Credit- paying a small percentage of a
  stocks price as a down payment and borrowing the
  rest

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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-Novemberhow much American spent in WWI

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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 nations 25,000 banks failed
• Unemployment leaped from 3 to 25
• 1 out of every 4 workers was out of a job

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World Wide Shock Waves

• Europe suffered from high war debts
• Great Depression compounded the problems b/c it
  limited Americas 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

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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

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