22-1: The Nation’s Sick Economy

Industry Key industries barely made a profit Some industries lost business to foreign competition and new American technologies Some industries suffered from declining demand for their goods after World War I, Coal industry declined because of new sources of energy New housing starts declined, affecting related businesses that depended on home construction

Agriculture After World War I demand for farm products fell drastically, as did prices Many farmers could not pay off their debts and lost their farms, which caused some rural banks to fail Congress passed federal price supports for farm products, but President Coolidge vetoed them

Consumer Spending By making credit easily available, businesses encouraged Americans to pile up a large amount of consumer debt Faced with rising prices, stagnant wages, and high levels of debt, consumers increased their buying

Distribution of Wealth Nearly half of all American families earned less than the minimum amount needed for a decent standard of living, while the rich got richer; this unequal distribution meant most consumers had too little money to buy the goods produced by American factories

Stock Market Many investors engaged in speculation and buying stocks on margin = only putting down a small portion of the price of the stock up front with the intention to pay off the rest with revenue received from the stock rising in value Over-speculation generated great wealth, but only on paper When the stock market crashed, many investors lost their life savings

Terms Alfred E. Smith: Democratic presidential candidate in 1928 (a Catholic) Black Tuesday: October 29, 1929, the day the stock market crashed Dow Jones Industrial Average: Index of stock prices of select companies Hawley-Smoot Tariff Act: Law that raised taxes on imports and worsened the depression Price Support: Law that keeps prices above a set level Speculation: Investments in high-risk ventures