Ch 14 Sec 1 The Nations Sick Economy

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Ch 14 Sec 1 The Nations Sick Economy

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1. Ch 14 Sec 1 The Nations Sick Economy Rising Wealth A Booming Stock Market A False Sense of faith in the economy

2. Essential Questions Why did the economy appear healthy? What danger signs were present in the economy of the late 1920’s?

3. “Wonderful Prosperity” In 1925 the value of the stock market was $27 billion, by Oct.1929 it was $87 billion. Since 1914 workers’ wages rose 40%. Unemployment averaged below 4%. John J.Raskob “Everybody Ought to be Rich.” $15 per wk, 20yrs.=$400mo

4. Welfare Capitalism Big companies launched strategies to meet workers demands. They could avoid union intervention, strikes, and keep productivity high. Employers raised wages, and gave paid vacations, health plans, recreation programs, and even English classes for recent immigrants. Organized labor lost members in the 1920’s.

5. Economic Danger Signs Uneven distribution of wealth. 200 large companies controlled 49% of industry. 0.1% controlled 34% of all savings, with incomes over $100,000. 71% earned less than $2,500 a year. 80% of families had no savings.

6. Personal Debt Installment Buying, buying expensive items on credit. Radios, Vacuum Cleaners, Kitchen Appliances, Refrigerators, Cars, Tractors and farm equipment. People believed future income would cover debt.

7. Playing The Stock Market Americans in the 1920’s had a “Get Rich Quick” attitude.

8. Playing the Market Part II Stock Speculation – High stock prices encouraged Americans to make high-risk investments in hopes of high return. Ordinary Americans now bought stock. Buying on Margin- Investors could purchase stock for only a fraction of its price. (10 to 50%) and borrow the rest. Brokers lent $, and as stocks rose $ could be made and brokers paid off.

9. Overproduction of Goods, Too Little Demand By the late 1920’s warehouses were overstocked. There were more good than consumers could buy. Auto industry slumped after 1925. Housing Construction fell by 25% between 1928 and 1929.

10. Trouble For Farmers and Workers About 6,000 Rural Banks failed. Farmers could not pay off machinery and mortgages.

11. No Help for Farmers and Workers Mc-Nary- Haugen farm relief bill would have given farmers more $ for crops. It was vetoed twice by Pres. Coolidge. No Price Supports! Factory workers, miners and textile workers still worked long hours for little pay especially in rural areas.

12. What signaled trouble in 1929? Uneven Distribution of Wealth Rising Personal Debt Stock Speculation Overproduction of goods Hardships of Farmers and Workers Laissez-Faire Gov. Econ. Policy

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