The Nation’s Sick Economy What caused the economy to go bad at the end of the 1920s?

Signs of Trouble in Late 20s 1. Railroad, farming, coal were struggling, layoffs begin Congress tries to pass price controls, Coolidge vetoes 2. Easy credit causes massive consumer debt, causing much of the public to stop buying new products 3. Income gap between the rich & poor was widening $5,000- 9,999(5%) $10,000 or more (1%) $2,000-$4,999 (29%) $1,999 or less (65%)

Herbert Hoover Elected Secy of Commerce Herbert Hoover easily wins election (Lassiez-Faire Republican) Despite many warning signs, Hoover states business will fix the problems & economy will be fine

Poor Stock Investments 1929: 4 million peopl invsted in a “Bull” Stock Market because the Dow Jones Average had risen every year in 1920s But many stocks bought on 1) speculation (buy risky stocks, for a quick profit) or 2) buy on margin (small down pymt, borrow rest)

Stock Market Crashes 1929: Investors worry about unemployment, begin selling stock Stock market plunges, Oct 29th “black Tuesday” 16.4 million shares were “dumped”, stock market loses 25% of its value $30 billion lost, panic ensues

Run on Banks & Financial Collapse People try to pull their remaining money out of bank, run on banks causes 11K of 25K banks to collapse By 1932, 90K businesses go bankrupt, unemployment rate jumps from 5% to 25%