The Economy in the Late 1920s The Streets are Paved with Gold

Background Most Americans were optimistic in the late 1920s. Medical advances reduced # of deaths. Economy was doing very well; very prosperous (wealthy).

Pres. Hoover’s Background Self-made millionaire. Admired for the way he organized food relief in Europe during & after WWI. Effective Secretary of Commerce (trade) under 2 presidents.

Economy Appears Healthy Stock values were high. Working-class prospered after WWI. –Wages increased. –Low unemployment. People were buying stocks with borrowed money.

Welfare Capitalism Because the economy was so strong, labor union membership weakened. Businesses gave in to some of their workers’ demands. –Raised wages –Provided benefits (paid vacations, health plans, & English classes to immigrants).

Economic Danger Signs 1.Uneven Prosperity 2.Buying on Credit 3.Playing the Stock Market 4.Too Many Goods, Too Little Demand 5.Trouble for Farmers 6.Trouble for Workers

Uneven Prosperity The rich got richer. Large corporations dominated industry (not small businesses). Few families held most of the nation’s personal wealth. –Wealthy families (.1%) earned more than $100,000/yr. Most families (80%) had no savings. People earned so little that almost everyone in a family, including children, had to work to get by. –Families (71%) earned less that $2,500/yr.

Buying on Credit Before the 1920s, Americans feared debt, so they postponed buying goods until they had the cash to pay for it. During the 1920s, Americans’ debt increased. –Assembly-line made goods more affordable and available. –The installment plan made expensive items irresistible. –People bought these goods regardless if they could afford it.

Assemblyline

Installment Plan Buying on Credit

Playing the Stock Market Before WWI, only the wealthy played the stock market. In the 1920s, there was a “get rich quick” attitude. –Speculation – high-risk investments in hopes of getting a high gain. –Buying on margin – investors could purchase stocks for only a fraction of its price and borrow the rest. Charged high interest on these loans.

Speculation: Get rich quick by taking high risks

Hoover’s reaction to stock market speculation.

Too Many Goods, Too Little Demand Wages increased, but people couldn’t buy goods as fast as the assembly-line made it. –Overproduction - warehouses full of unsold goods. Industries had to slow down production.

Trouble for Farmers During WWI, farm prices increased during WWI. –Farmers purchased tractors and other machinery. –These machines allowed more production to supply the war effort, so farmers bought more land.

Trouble for Farmers (cont’d) After WWI, farm prices decreased. –Unable to pay debts for land and machinery. –Unable to repay loans, rural banks went out of business. -Demand for goods was not as high after WWI

Trouble for Workers Overproduction and low demand led to layoffs to counter the overproduction of goods. Layoffs led the Workers to work longer hours for lower wages(few Unionized) –Some workers worked 56 hours/wk. and made about $10/wk. The boss orders more workers… Amanda, send me more workers, these are too expensive. Because too much profit is never enough!

Spoke Diagram – Economic Danger Signs

Spoke Diagram Economic Danger Signs of the 1920s Directions – During the 1920s, rising wealth and a booming stock market gave Americans a false sense of faith in the economy. In fact, there were signs that the economy was in trouble. Using your notes or your textbook (Ch. 12.1), create a spoke diagram of the economic danger signs of the 1920s. Be sure to answer the following questions for each. –Explain how each danger sign could affect the economy in a negative way. –Illustrate (draw a pic/symbol) the meaning of each danger sign.

Imagine that you are a reporter for a major U.S. newspaper in the 1930’s. You are to write the front page articles related to the Great Depression. Your articles (2) must have a headline and illustration related to the article. Make sure you also include the name of the newspaper you are reporting for and date (ex. New York Times, etc.) You must include the following in your articles: –Article #1: Economic Danger Signs of the 1920’s –Article #2: Social Effects of the Great Depression