Late 1920s Economy 14.3. “Wonderful Prosperity” Stock market value keeps increasingStock market value keeps increasing –1925 = $27 billion –1929 = $87.

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Presentation transcript:

Late 1920s Economy 14.3

“Wonderful Prosperity” Stock market value keeps increasingStock market value keeps increasing –1925 = $27 billion –1929 = $87 billion Average wages had risen 40% since 1914.Average wages had risen 40% since –Unemployment < 4% Popular literaturePopular literature –Jesus, the businessman (The Man Nobody Knows) –“Everybody Ought to Be Rich” (article)

Other Positives Welfare CapitalismWelfare Capitalism –Meeting the needs of workers to prevent labor strikes Higher wagesHigher wages Paid vacationsPaid vacations Health plansHealth plans Recreation programsRecreation programs English classes for immigrantsEnglish classes for immigrants

Bad Signs Personal debtPersonal debt –America’s personal debt rose ~70% during the 1920s. –Buying fancy goods, but no money in the pocket Stock Market SpeculationStock Market Speculation –“Get rich quick” schemes –Investments: high-risk, high-reward Buying on MarginBuying on Margin –Purchasing a stock for only a fraction (10%) of the value –Borrow the rest of the money w/ high-interest loan –When (if) stock value increases, sell & pay off loan.

Bad Signs Overproduction of goodsOverproduction of goods –Overstocked warehouses Farmers / rural banks failFarmers / rural banks fail –President Coolidge vetoed any gov’t aid to farmers. –Banks failed when farmers could not pay back loans. Uneven distribution of wealthUneven distribution of wealth –Mainly, the rich got richer. –71% lived below the “minimum standard of living.” –80% of all families had no savings. –60% of the time, it works every time.

How bad could it be? Pretty bad.