Boom and Bust USA in the 1920s In the 1920s …The Roaring Twenties America’s economy recovered quickly after WWI The government was Republican and favored.

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Presentation transcript:

Boom and Bust USA in the 1920s

In the 1920s …The Roaring Twenties America’s economy recovered quickly after WWI The government was Republican and favored ‘big business’ After the war, the government followed a policy of isolationism and focused on internal affairs By the mid 1920s the economy was booming

Boom Factors leading to an economic boom

The factors US industry had been boosted by the war. Republican government’s policy of laissez faire. Protectionism - import duties raised (1922). Mass production - cars, radios, refrigerators etc. Hire Purchase - people could buy on credit. There was massive consumer spending.

Prosperity With more money to spend people invested on the stock market. President Hoover’s aim: “a chicken in every pot and two cars in every garage”.

As a result … Many Americans were confident about the economy.

Confidence Share prices were going up fast. People were getting richer.

Stock Market Speculation American industry booms, price of shares rises. Investors sell their shares at higher prices and make huge profits. Get Rich! Quick!!

Continued speculation More people invest, pushing prices higher People buy ‘on the margin’ Let’s get RICH !

But was everyone so confident?

Beneath the ‘Boom’ Farmers did not prosper - new machines produced more which lowered prices. The black population did not prosper - farmers laid them off. Many moved North looking for work. Recent immigrants did not prosper - they were given low paid jobs and lived in overcrowded conditions. Workers in ‘old’ industries (eg. mining, textiles) did not prosper - they were low paid.

Beneath the ‘Boom’ 50% of American families earned less than $2000 a year. American industry was producing too many goods.

The Coming Crash 20 million shareholders by summer 1929 Prices reach an all time high Experts start to worry Profits Fall Car and Steel Production falls People start to Sell

The Coming Crash Between Saturday 19 th and Thursday 24 th October millions of shares were sold. Friday 25th October - Top bankers decide to support the market. Banking firms buy millions of shares for more than they are worth. Saturday 26th October - President Hoover said, “The fundamental business of the country, is on a sound and secure basis”

The Coming Crash Monday 28th October - Massive selling 3 million shares sold in the last hour of trading, 9 million sold in total Banks stop supporting prices.

Black Tuesday Tuesday 29th Oct 16 million shares sold. No buyers found. Ticker tape machines break due to pressure. Many investors are ruined.

Bust Millions of shares are now worthless Crash !

Re-Cap Overproduction + Underlying poverty Stocks of unsold goods Demand falls Profits Fall People start to sell shares Panic. CRASH Lack of confidence