The Nation’s Sick Economy 14.1 The Great depression The Nation’s Sick Economy 14.1

BIG IDEAS MAIN IDEA: As the prosperity of the 1920’s ended, sever economic problems gripped the nation. WHY IT MATTERS NOW: The Great Depression has had lasting effects on how Americans view themselves and their government.

Industries In Trouble While life of the 1920’s appeared to prosperous in reality several major industries were failing to make a profit. Railroads lost business to new forms of transportation Mining and lumber were no longer in high demand with the end of the war Coal was being replaced by new forms of energy The number of houses being built began to decline

Farmers need a lift Farming industry booms during war Post-war need for crops decreases by 40%+ Farmers cannot pay debts—banks close Price supports by the government promise to buy excess crops at a set price

Consumers have less to spend Americans overall were buying less because of rising prices, stagnant wages, and the uneven distribution of wealth The gap between the rich and the poor is growing– 70% of U.S. families are living on less than $2,500 a year Credit (buy now pay later) lifestyles of the 1920’s left many people in debt they could not pay off

The Election of 1928 Herbert Hoover (R) Alfred E. Smith (D) Secretary of Commerce under Harding and Coolidge Mining engineer from Iowa Ran on the coat tails of the republicans “We in America are nearer to the final triumph over poverty than ever before” Life long politician 4 terms as Governor of New York Lost Democrats in the south partly because he was a Catholic

American Dreams of Riches in the Stock market Many American are investing any excess money stocks or shares of ownership in company Stock prices were steadily rising in the 1920’s but problems quickly appeared Speculation: ignoring risks and buying stocks with the chance of a quick profit Buying on margin or buying stocks with a down payment and barrowing the rest Little government regulation Dow Jones Industrial Average: measures the health of the stock market based on large firms stock prices

The Stock Market Crashes October 29, 1929—Black Tuesday the Stock Market bubble had finally burst $30 billion lost in the crash 16 million stocks dumped in one day Prices went spiraling down as people sold their investment Those who bought on credit had huge debts they couldn’t pay off

The Great Depression 1929-1940 the economy plummeted and unemployment skyrocketed Stock market crash caused people to panic and with draw all of their money from the banks 1929 600 banks collapse 1933 11,000 of the 25,000 banks have failed 90,000 businesses went bankrupt Unemployment jumps from 3% to 25%

Global Effects The U.S. was not the only country to face depression– many European nations faced the same struggles with the postwar economies Hawley-Smooth Tariff Act: established to protect farmers and manufactures from foreign competition– does the opposite by restricting the flow of goods