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Published byCori Garrison Modified over 9 years ago
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The Nation’s Sick Economy
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Industries in Trouble Key industries barely making a profit Mining and lumbering faced diminished demands Key industries barely making a profit Mining and lumbering faced diminished demands Big industries of the 20s began to weaken- cars, construction, consumer goods 1925-29-permits for new homes fell 25% Home construction is an important economic indicator Big industries of the 20s began to weaken- cars, construction, consumer goods 1925-29-permits for new homes fell 25% Home construction is an important economic indicator
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Farmer’s struggling During war- international demand for crops soared Prices rose Farmers planted more crops & took out loans to buy more land & equipment
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Farmers struggling To compensate for falling prices, farmers boosted production Made things worse Farm income decreased by $6 billion Farmers couldn’t pay loans Lost farms Rural banks failed Government wanted to help Proposed price supports
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Price Supports McNary-Haugen bill proposed price supports- the support of certain prices at or above market value by the government 1. Govmt would buy surplus crops for more than the market rate 2. Govmt would sell products to rest of world for less than they were worth 3. pass tax on domestic food to make up for lost money Vetoed by President Coolidge twice 1. Govmt would buy surplus crops for more than the market rate 2. Govmt would sell products to rest of world for less than they were worth 3. pass tax on domestic food to make up for lost money Vetoed by President Coolidge twice
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Consumers Have Less $ to Spend Farmers income fell Bought fewer goods By late 1920s- Americans buying less Why? –Rising prices –Stagnant wages –Unbalanced distribution of income –Overbuying on credit
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Living on Credit People living beyond their means Credit-buy now, pay later –Installment plan People living beyond their means Credit-buy now, pay later –Installment plan –Americans piling up large debt –People cut back spending –Americans piling up large debt –People cut back spending
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Uneven Distribution of Income Incomes not raising fast enough 1920s-half nation’s families earned $1,500/year 1920-1929 income of wealthiest 1% rose 75% Incomes not raising fast enough 1920s-half nation’s families earned $1,500/year 1920-1929 income of wealthiest 1% rose 75% American wages as a whole rose 9% 1929-wealthiest 5% took in 33% of nations income Poorest 40% earned just over 10% American wages as a whole rose 9% 1929-wealthiest 5% took in 33% of nations income Poorest 40% earned just over 10%
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New President Herbert Hoover Americans desired to continue prosperity they experienced under Republican administrations
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President Hoover
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The Stock Market Comes Tumbling Down BY 1929-many economists warning of weakness of the stock market Most people had no idea there was a problem People continued to invest in the stock market
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Dreams of Riches in the Stock Market Throughout 20s- stock prices rose steadily Many Americans rushed to buy stocks Many Americans hoping to get rich
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Dreams of Riches in the Stock Market Many investors engaged in speculation –Made stock prices rise Made businesses look worth more than they were
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Dreams of Riches in the Stock Market Many investors also began buying on margin This worked as long as prices rose If stocks declined there was no way to pay off the loan
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Black Tuesday October 29, 1929- The bottom fell out of the stock market Known as Black Tuesday People and businesses tried to sell stocks before prices fell further
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Black Tuesday People who bought stock on credit acquired huge debts Within weeks investors had lost $30billion
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Causes of the Great Depression Old and decaying industrial base Crisis in the farm sector Easy credit Unequal distribution of income
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Financial Collapse People panicked and withdrew all their money from banks Many banks lost their money in bad investments 659 banks closed in 1929
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Financial Collapse By 1933-6,000 banks had closed Wiped out 9 million individual savings accounts 85,000 businesses went bankrupt
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Financial Collapse Unemployment rose from 3% in 1929 to 25% in 1933 Many that kept their job had to take a pay cut
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Worldwide Shock Waves Congress makes things worse Pass Hawley-Smoot Tariff Act-highest tariff in U.S. History Supposed to help Americans from foreign competition
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Worldwide Shock Waves Hawley Smoot Tariff Act- Reduced flow of good into the U.S. –Prevented other countries from earning American currency Could not buy American exports –Made unemployment worse
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Worldwide Shock Waves Many European countries retaliated by raising their own tariffs Caused world trade to reduce by more than 40%
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