1. The Nation’s Sick Economy
What caused the economy to go bad at the end of the 1920s?

2. Signs of Trouble
Several industries were struggling at the end of the 1920s
Railroad was losing business due to cars/planes
Coal mining was down due to electricity/oil
Lumber industry suffers due to less houses being built vs vs
Farming also in trouble
- Crop prices rose after WW I, so farmers grew more crops, causing prices to fall
- Farmers can’t pay debt to banks, banks seize farms/equipment, Congress tries to pass price-supports but Coolidge vetoes

3. Faltering Economy
People were buying too many things on credit in the mid-20s, creating massive consumer debt
Late 20s: Consumers were buying less because prices were rising, while wages were not (inflation)
Income gap between the rich & poor were widening
80% of Americans did not put money into savings
1,000 or less 2,
5,000-10,000
10,000-20,000
Over 20,000

4. Herbert Hoover Elected
Hoover runs as a Laissez-Faire Republican (similar to Coolidge)
Wins because Republicans ruled over prosperous 20s
Despite warning signs & unemployment, Hoover states business will fix issue with the economy
“We in America are nearer to the final triumph over poverty than ever before.”

5. Booming Stock Market
1929: 4 million Americans have invested in the stock market
The Dow Jones Industrial Average (which measure overall stock price) had risen throughout the 1920s
Many wanted to make money in the “bull market” so many investors use speculation (buying risky stocks & bonds to make a quick profit)
Many also buying on margin: paying a small % of a stock’s
price as a down payment and borrowing for the rest.

6. The Stock Market Crashes
Investors worry about economy, begin selling stock
Stock market plunges on Oct. 24th “Black Tuesday”
By Oct 29th 16.4 million shares were “dumped”
People who had bought on margin now have a huge debt & worthless stock
● Total investments lost = $30 billion, panic ensues

7. Financial Collapse
People try to pull their remaining money out of the banks
Run on banks causes banks to fail
By ,000 of 25,000 banks had collapsed
: 90,000 businesses go bankrupt
US GNP (amount of goods & services produced) is cut in half
People stop buying, businesses start laying off employees
: Unemployment rate goes from 3% to 25%

8. Hawley-Smoot Tariff Act
Congress raises tariffs to protect American farmers and manufacturers
Plan backfires as Europe can’t afford to buy American products
Worldwide trade drops 40%, worldwide depression on the rise

9. Causes of the Depression
An unequal distribution of income.
New technology hurt many industries
Too much debt due to easy credit.
People gamble on stock market
Banks fail
Tariffs hurt American goods worldwide
What do you mean the roaring 20s are over??