p.

464-471

THE NATIONS SICK ECONOMY

Objectives
Summarize the critical problems threatening the American economy in the
late 1920s

Describe the causes of the stock market crash and Great Depression
Explain how the Great Depression affected the economy in the United
States and throughout the world.

ECONOMIC TROUBLES ON THE HORIZON

Industries in Trouble

Farmers Need a Lift

Railroads

War period

Started to lose profits due to

Trucking
Buses
Private autos

Rising prices/demands

Lumber Steel
No longer a war time demand for mass production
Fall in housing starts

Mining
Competition with new, cheaper forms of energy

Post War
Prices dropped +40%
In response, farmers begin to plant more
Farms were lost and foreclosed on

Price-supports
Federal price supports for key products such as wheat, corn, cotton, &
tobacco
McNary-Haugen bill
Coolidge vetoes the bill 2x

ECONOMIC TROUBLES ON THE HORIZON

Consumes Have Less Money to Spend

Americans are buying less

Rising prices
Stagnant wages
Unbalanced distribution of income
Over buying on credit

Living on Credit
Credit
An arrangement in which consumers agreed to buy now and pay later

Uneven distribution of Income

70% of the nations families earned less than

$2,500
Considered the minimum for a decent standard of living
$34,712.43 2014

Faced with debt consumers stopped spending

14.9% currently below poverty level

When they could not pay back their debt, the companies suffered

$27,570 family of 5

HOOVER TAKES THE NATION

The Election of 1928

Herbert Hoover Republican

Dreams of Riches in the Stock Market

Dow Jones Industrial Average

A measure based on the prices of stock of 30 large
companies, widely used as the barometer of the
stock markets health

Mining engineer
Never held elected office
Secretary of Commerce under Harding & Coolidge

Bull Market

Alfred E. Smith Democrat

Bear Market

Career politician
4x NY Governor

a general decline in the stock market over a period

of time

a period of generally rising prices

THE STOCK MARKET CRASHES

Dreams of Riches in the Stock Market (cont.)

Black Tuesday

Speculation

October 29, 1929

Buying of stocks and bonds on chance of

quick profit

Bottom fall out of the market

Buy on margin
Paying a small percentage of a stocks price as
a down payment and borrowing the rest.

Prices started to fall and people sold quickly

16.4 millions shares sold

By mid-November $30 billion had been lost

Equal to the total cost of WWI

FINANCIAL COLLAPSE
Bank and Business Failures

Great Depression
The period from 1929-1940 in which the economy
plummeted and unemployment skyrocket

Gross Domestic Product - GDP

The monetary value of all the finished goods and services produced
within a country's borders in a specific time period
$104 billion to $59 billion ~43% decrease
90,000 business when bankrupt

Bank Closers

Unemployment

1929 300
1933 11,000 of 25,000

1929-1933
3% (1.6 million) 25% (13 million) 5.8%
Those who kept their jobs faced pay cuts

FINANCIAL COLLAPSE
Worldwide Shock Waves

Hawley-Smoot Tariff
Highest protective tariff in US history
Designed to protect, but reduced the flow of
goods
Many countries retaliated by raising their own
tariffs
Trade falls 40%

Causes of the Great Depression

Tariffs and war debt policies

that cut down the foreign
market for American goods

A crisis in the farm sector

The availability of easy

credit

An unequal distribution of
income

1. How did diminished demand affect farmers and businesses in the 1920s?
2. How did popular perceptions of prosperity influence the election of 1928?
3. How did the stock market crash help cause the Great Depression?

4. What was the United States response to try to protect its economy?
5. How did the Great Depression effect other countries?

6. How did this affect the over all economy of the world?