1. Use your phone to research the following: What is “economics?”
Bell Ringer
Use your phone to research the following:
What is “economics?”
List 3 examples of what causes the economy to grow?

2. Objectives
Cite and explain evidence that led to the transition of the U.S. economy from laissez-faire capitalism to an increasingly regulated economy.
Analyze and evaluate historical arguments regarding monetary policy.
Critique the government‘s use of tariffs and trade agreements.

3. Politics of the 1920s
Harding to Coolidge

4. Warren Harding Born in Ohio in 1865
Elected to one term in the U.S. Senate
Runs in 1920 under the campaign slogan of “Return to Normalcy”
Chose CALVIN COOLIDGE as his running mate for VP.

5. Warren G. (Harding)

6. Warren G’s Homies: The Ohio Gang
Harding made some good appointments to his cabinet:
Herbert Hoover – Secretary of Commerce
Andrew Mellon – Secretary of the Treasury
However, some were not so good…
The “Ohio Gang” – Many cabinet posts were given to his buddies from home. These guys sold government jobs, pardons, etc.
Harding often didn’t have any clue what they were doing.
Charles R. Forbes, who ran the Veterans Bureau sold medical supplies and kept the money for himself – costing the U.S. over $200 million.

7. TEAPOT DOME SCANDAL
Harding’s Sec. of the Interior ALBERT FALL leases land with U.S. oil reserves to private interests in TEAPOT DOME, WY and ELK HILLS, CA.
Fall gets $300,000 in bribes for doing this.
Fall becomes the first cabinet officer to go to prison.

8. “SILENT CAL” COOLIDGE
On a trip out west in 1923, Harding has a heart attack and dies. This happens just before the news about the scandals breaks.
Calvin Coolidge – from Vermont – takes over.
He quickly got rid of many of Harding’s corrupt friends, but kept Mellon and Hoover on staff.

9. Cal Coolidge

10. Coolidge in office
Coolidge was PRO-BUSINESS. He thought that the gov’t should stay out of business’s business as much as possible.
He wanted a SMALL GOV’T with little bureaucracy.
“The chief business of the American people is business. The man who builds a factory builds a temple. The man who works there worships there.”
~Calvin Coolidge, 1925

11. Election of 1924
Coolidge wins in 1924 easily over John W. Davis (Democrat) and Robert M. La Follette (new Progressive Party).
La Follette was a Senator from Wisconsin, but got only 17% of the popular vote.
Coolidge serves for 4 more years and give the U.S. the “normalcy” that Harding promised.

12. Economics of the 1920s
Boom to Crash

13. Economics for Southern blacks
Many black citizens in the South were tied to the land through a system of “sharecropping.”
Sharecroppers paid rent to land owners by giving them a large percentage of their crop.
Economics and Racism gave many Southern blacks a strong incentive to try and escape this life.

14. Economics in the North
After World War I, Northern cities were booming industrial centers.
Racism and prejudice towards blacks was slightly less prevalent in the North as well.
Many Southern blacks will take this opportunity to escape the prejudices of life in the South and seek job opportunities in the North.
This is the “Great Migration.”

15. Mass production and consumerism
Henry Ford’s use of the assembly line is adopted by most American industries.
As a result American manufacturing output increases at a dramatic rate during the 1920s.
With the availability of cheap goods America becomes a massive consumer society and the economy booms.
People were buying cars, radios, electric ice-boxes, fans, vacuum cleaners…

16. Agricultural overproduction
Farmers bought more land and more machines accruing more debt in the process.
With more land and more machines farmers began to overproduce.
This naturally forced the price of agricultural products down.

17. Buying on Credit BUYING ON MARGIN
People began purchasing luxury items on credit and racking up huge debt.
BUYING ON MARGIN
People began buying stocks with money they borrowed from a broker thinking that they would pay off the loan when they sold the shares.

18. Bull Market Boom American manufacturers are mass producing goods.
American consumers are buying tons of stuff, much of it on credit.
Farmers are producing massive amounts of agricultural products.
People speculate that the stock market will continue to grow indefinitely and make risky decisions.

19. Crash
The optimism and financial gains of the great bull market were shaken on September 18, 1929, when share prices on the New York Stock Exchange (NYSE) abruptly fell.
People were scared of the Smoot-Hawley Tariff being passed, which raised tariff rates.
Fearing what the Tariff might do to their stocks people began rapidly selling their stocks.
Other countries might retaliate by raising their tariffs and decreasing U.S. exports and hurt American business.

20. Crash Black Tuesday October 29, 1929,
Rumor was that U.S. President Herbert Hoover would not veto the pending Smoot–Hawley Tariff Act
16 million shares were traded, and the stock market lost an additional 30 points, or 12%

21. Boom Crash In sum The Twenties were a time of extravagant living.
Major Causes of the Crash and Depression:
Overproduction/Falling Prices
Buying goods on credit
Speculating
Buying stocks on margin.
Crash

22. The Great Depression begins