False Sense of Prosperity Mood of America optimistic about future Medical advances = life expectancy up 10 years Infant mortality down Standard of living.

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Presentation transcript:

False Sense of Prosperity Mood of America optimistic about future Medical advances = life expectancy up 10 years Infant mortality down Standard of living was improving!

Hoover is admired as president (self-made millionaire – food relief in WWI) Laissez-faire economics appeared to be working well Stock Market up, values up (1925 = $27 billion, in 1928 alone value rose $11 billion) From GNP rose 6% per year (previous decade 1%) – total value of good and services a country produces annually National income rose from 58 billion in 1921 to 83 billion in 1929.

Herbert Hoover

Signs of Weakness in Economy Big business is booming (number of millionaires doubles in 20s) – small businesses are being wiped out Gap between rich an poor growing rapidly Disparity between management & labor grew 1929, 200 large companies held 49% of American Industry 1929, 24,000 families (0.1%) had incomes of more than $100,000 Also held 34% of nations total savings

71% of families earned less than $2,500 80% of all families had no savings Tax cuts to the wealthiest were given (so not to hinder further business expansion) but hurt small business

Personal Debt Rises Buying on Credit = easier to purchase things = debt soars = spending declines Personal debt 1920 = $48 billion 1929 = $72 billion People unable to manage credit, poor investing, etc. Heavy focus on the present and no concern for the future will lead to depression in 30s.

Demand For “Backbone” Industries Down Textiles are losing out to foreign competition Japan, China, India, Latin America Coal mining is losing out to new energy sources Electricity expanding, hydro-power, natural gas, fuel-oil

Railroads losing to new forms of transportation Automobiles, trucks, buses

Home Construction is down (25% between ) Led to decrease in other businesses (raw materials, furnishings, appliances)

Agriculture is struggling During WWI, demand was high, drops 50% after war Farmers going into debt (lost market, huge surplus) Farms close, rural banks close (couldn’t receive payments for wartime debts/loans) 6,000 rural banks close during the 20s

Playing the Stock Market Speculation – high risk investments in hopes of huge returns, due to soaring stock values Buying on Margin – purchase a stock for just a fraction of its price (10 to 50%), borrow the rest Encourages less wealthy investors Brokers then charged high interest rates and could demand payment at any time

Market Crashes Loss of confidence = average investor sold fast = stock market prices fell fast October 29, 1929, Black Tuesday – the market falls out The Roaring 20s comes to a halting stop!