The Nation’s Economy Falters Chapter 22, Section 1

Troubles on the Horizon While many Americans grew wealthy, others grew poor Consumers and farmers went into debt

Farmers lose money/land Demand for crops falls after World War I, causing many farmers to go into debt. Many farms lost when banks foreclosed to pay off debts

Congress to the Rescue Congress tried to help out farmers with the McNary-Haugen bill. Called for federal price-supports for certain crops Government would buy surplus and sell on world market Twice vetoed by Coolidge

Consumers spend less As income fell, Americans bought fewer goods and services Gap between rich and poor widens

Prosperity of 1920s was a false front Many Americans appeared wealthy during the 1920s. They were buying goods on credit – buy now, pay later.

1920S RICH GOT RICHER AND POOR GOT POORER

Election of 1928 Republican – Herbert Hoover (Foods Administration, Sec. Of Commerce) Democrat – Alfred E. Smith

Hoover wins Hoover won easily – pointed to prosperity of 1920s under Republicans Smith sounded bad on the radio

Stock Market Stock Market becomes visual symbol of America’s prosperity Dow Jones Industrial Average – barometer of stock market’s health – based on 30 firms in NYSE

By 1929, about 4 million Americans owned stocks. Many were average Americans who were hoping to cash in on the “bull market”

Speculation – buying stocks and bonds on the chance of a quick profit. Buying on Margin – paying a small percentage of a stock’s price as a down payment and borrowing the rest.

The Bottom Falls Out BLACK TUESDAY – October 29, 1929 Falling stock prices hit a low. By mid-November, investors had lost about $30 billion.

Great Depression Stock market crash signals the beginning of the Great Depression – the period from 1929 – 1940 in which the economy plummeted and unemployment skyrocketed.

Banks and Businesses Fail People rushed to the banks in a panic. Unemployment jumped from 3% to 25% in 4 years.

Europe also had economic troubles.

Hawley-Smoot Tariff Established the highest protective tariff in U.S. History (1930) Tariff worsened the worldwide depression (countries can’t buy U.S. exports)

Causes of the Great Depression Tariffs and war debt policies cut foreign market for U.S. goods Crisis in farm sector Availability of easy credit Unequal distribution of income

NO IMPORTS = NO EXPORTS