The Nation’s Sick Economy p. 464-471

Objectives Summarize the critical problems threatening the American economy in the late 1920s Describe the causes of the stock market crash and Great Depression Explain how the Great Depression affected the economy in the United States and throughout the world.

Economic Troubles on the Horizon Industries in Trouble Farmers Need a Lift Railroads Started to lose profits due to Trucking Buses Private autos Lumber – Steel No longer a war time demand for mass production Fall in housing starts Mining Competition with new, cheaper forms of energy War period Rising prices/demands Post War Prices dropped +40% In response, farmers begin to plant more Farms were lost and foreclosed on Price-supports Federal price supports for key products such as wheat, corn, cotton, & tobacco McNary-Haugen bill Coolidge vetoes the bill 2x

Economic Troubles on the Horizon Consumes Have Less Money to Spend Uneven distribution of Income Americans are buying less Rising prices Stagnant wages Unbalanced distribution of income Over buying on credit 70% of the nation’s families earned less than $2,500 Considered the minimum for a decent standard of living $34,712.43 – 2014 14.9% currently below poverty level $27,570 – family of 5 Living on Credit Credit An arrangement in which consumers agreed to buy now and pay later Faced with debt consumers stopped spending When they could not pay back their debt, the companies suffered

Hoover Takes the Nation Dreams of Riches in the Stock Market Hoover Takes the Nation Dow Jones Industrial Average A measure based on the prices of stock of 30 large companies, widely used as the barometer of the stock market’s health Bull Market a period of generally rising prices Bear Market a general decline in the stock market over a period of time The Election of 1928 Herbert Hoover – Republican Mining engineer Never held elected office Secretary of Commerce under Harding & Coolidge Alfred E. Smith – Democrat Career politician 4x NY Governor

The Stock Market Crashes Dreams of Riches in the Stock Market (cont.) Black Tuesday Speculation Buying of stocks and bonds on chance of quick profit Buy on margin Paying a small percentage of a stock’s price as a down payment and borrowing the rest. October 29, 1929 Bottom fall out of the market Prices started to fall and people sold quickly 16.4 millions shares sold By mid-November $30 billion had been lost Equal to the total cost of WWI

Financial Collapse Great Depression Bank Closers Bank and Business Failures Great Depression The period from 1929-1940 in which the economy plummeted and unemployment skyrocket Bank Closers 1929 – 300 1933 – 11,000 of 25,000 Gross Domestic Product - GDP The monetary value of all the finished goods and services produced within a country's borders in a specific time period $104 billion to $59 billion ~43% decrease 90,000 business when bankrupt Unemployment 1929-1933 3% (1.6 million) – 25% (13 million) 5.8% Those who kept their jobs faced pay cuts

Financial Collapse Hawley-Smoot Tariff Worldwide Shock Waves Causes of the Great Depression Hawley-Smoot Tariff Highest protective tariff in US history Designed to protect, but reduced the flow of goods Many countries retaliated by raising their own tariffs Trade falls 40% Tariffs and war debt policies that cut down the foreign market for American goods A crisis in the farm sector The availability of easy credit An unequal distribution of income

How did diminished demand affect farmers and businesses in the 1920s? How did popular perceptions of prosperity influence the election of 1928? How did the stock market crash help cause the Great Depression? What was the United State’s response to try to protect it’s economy? How did the Great Depression effect other countries? How did this affect the over all economy of the world?