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The Economy of the late 1920’s
Positives
 Number of infant deaths down
 Life expectancy increased to 59 for men, 63 for women
 Economy appeared healthy
 Many assumed the prosperity would continue
Economy of the Late1920s
Economy
 Coolidge, “I do not choose to run for President in 1928”
 Hoover easily wins against his opponent, Al Smith; anti-Catholic sentiments aided Hoover’s win
 Hoover promises to preserve “rugged individualism”
 Hoover largely followed Coolidge’s economic policies
 Public thought prosperity would continue under him
 In 1925, all stocks were valued at $27 billion
 In 1928 alone, value went up $11 billion
 By early October 1929, stock values were at $87 billion!!
Economy of the Late1920s
Economy of the Late1920s
Economy of the Late1920s
Other positives
 Since 1914, workers’ wages rose by 40%
 Unemployment was under 4%
 Almost everyone’s basic needs: food, clothing, shelter: were being met
 Investing lots of income was seen as normal
 Buying on credit was popular; people were buying luxury items, things they
didn’t necessarily need
Welfare Capitalism
 Strategies by businesses to meet the needs of their workers
 Could avoid union intervention, prevent strikes, keep productivity high
 Paid vacations, health plans, recreation programs, and more
 As a result, organized labor lost members in 1920’s
Signs of Trouble!
 Most not seen until later…too late!
 1. Uneven prosperity
-rich got richer
-big corporations, not small businesses controlled industry
-200 companies controlled 49% of industry in US
-the top 0.1% of families had 24% of wealth!
Uneven Prosperity
 In addition, 71% of families earned less than $2,500 a year
 80% of families had NO savings
 Also, taxes were cut, which at the time only the rich paid, so they benefitted
by big tax cuts!
2. Personal Debt
 Credit, installment plans, whatever to buy new products
 60% of automobiles & 70% of furniture bought this pay
 No money to pay for them!
 Most felt future income could pay for current debt
 Prosperity led to frivolous spending
3. Playing the Stock Market
 Speculation in the market was big, “Get Rich Quick” attitudes
 Big risks in hopes of a huge return
 All types of incomes were trying it
 Buying on margin: less wealthy would buy 10-50% of a price of a stock, and borrow the
rest
 Brokers charged high interest rates and could demand payment at any time
 Borrowers could sell anytime and make enough to pay off loan and broker, and still make
$$!
 Market was largely unregulated
3. Playing the Stock Market
 Crash leads to:
 Loss in consumer & business confidence
 Bank runs
 Business cutbacks
 Less consumerism
Economy of the Late1920s
4. Too many goods, too little demand
 Warehouses overstocked in US
 More goods than consumers could buy
 Industries slowed in late 1920’s as a result
 Auto industry slumped after 1925
 Steel, rubber, glass also declined as a result
 Housing construction fell 25% in 1928-1929
GDP
5. Trouble for Farmers and Workers
 Farms were failing due to low prices for goods
 Overproduction
 Europe returned to growing its own crops
 Rural banks would give farmers more time to pay loans, but if they didn’t,
they could close
 6,000 rural banks closed in late 1920’s: BEFORE the crash!
 Coolidge vetoed a bill TWICE that would help farm prices increase: BAD
MOVE
5. Continued
 Laborers often still worked long hours for low wages
 Bad conditions still in coal and textiles
 Women in TN mills worked 56 hours a week at 16-18 cents an hour: $10 a
week!
Unemployment Rate
Herbert Hoover, August of 1928
 “We in America today are nearer to the final triumph over poverty than ever
before in the history of any land.”
Economy of the Late1920s
Economy of the Late1920s

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Economy of the Late1920s

  • 1. The Economy of the late 1920’s
  • 2. Positives  Number of infant deaths down  Life expectancy increased to 59 for men, 63 for women  Economy appeared healthy  Many assumed the prosperity would continue
  • 4. Economy  Coolidge, “I do not choose to run for President in 1928”  Hoover easily wins against his opponent, Al Smith; anti-Catholic sentiments aided Hoover’s win  Hoover promises to preserve “rugged individualism”  Hoover largely followed Coolidge’s economic policies  Public thought prosperity would continue under him  In 1925, all stocks were valued at $27 billion  In 1928 alone, value went up $11 billion  By early October 1929, stock values were at $87 billion!!
  • 8. Other positives  Since 1914, workers’ wages rose by 40%  Unemployment was under 4%  Almost everyone’s basic needs: food, clothing, shelter: were being met  Investing lots of income was seen as normal  Buying on credit was popular; people were buying luxury items, things they didn’t necessarily need
  • 9. Welfare Capitalism  Strategies by businesses to meet the needs of their workers  Could avoid union intervention, prevent strikes, keep productivity high  Paid vacations, health plans, recreation programs, and more  As a result, organized labor lost members in 1920’s
  • 10. Signs of Trouble!  Most not seen until later…too late!  1. Uneven prosperity -rich got richer -big corporations, not small businesses controlled industry -200 companies controlled 49% of industry in US -the top 0.1% of families had 24% of wealth!
  • 11. Uneven Prosperity  In addition, 71% of families earned less than $2,500 a year  80% of families had NO savings  Also, taxes were cut, which at the time only the rich paid, so they benefitted by big tax cuts!
  • 12. 2. Personal Debt  Credit, installment plans, whatever to buy new products  60% of automobiles & 70% of furniture bought this pay  No money to pay for them!  Most felt future income could pay for current debt  Prosperity led to frivolous spending
  • 13. 3. Playing the Stock Market  Speculation in the market was big, “Get Rich Quick” attitudes  Big risks in hopes of a huge return  All types of incomes were trying it  Buying on margin: less wealthy would buy 10-50% of a price of a stock, and borrow the rest  Brokers charged high interest rates and could demand payment at any time  Borrowers could sell anytime and make enough to pay off loan and broker, and still make $$!  Market was largely unregulated
  • 14. 3. Playing the Stock Market  Crash leads to:  Loss in consumer & business confidence  Bank runs  Business cutbacks  Less consumerism
  • 16. 4. Too many goods, too little demand  Warehouses overstocked in US  More goods than consumers could buy  Industries slowed in late 1920’s as a result  Auto industry slumped after 1925  Steel, rubber, glass also declined as a result  Housing construction fell 25% in 1928-1929
  • 17. GDP
  • 18. 5. Trouble for Farmers and Workers  Farms were failing due to low prices for goods  Overproduction  Europe returned to growing its own crops  Rural banks would give farmers more time to pay loans, but if they didn’t, they could close  6,000 rural banks closed in late 1920’s: BEFORE the crash!  Coolidge vetoed a bill TWICE that would help farm prices increase: BAD MOVE
  • 19. 5. Continued  Laborers often still worked long hours for low wages  Bad conditions still in coal and textiles  Women in TN mills worked 56 hours a week at 16-18 cents an hour: $10 a week!
  • 21. Herbert Hoover, August of 1928  “We in America today are nearer to the final triumph over poverty than ever before in the history of any land.”