The Nation’s Sick Economy

1. The Nation’s Sick Economy

2. Economic Troubles • Industries in trouble • Railroad, textiles, steel • Mining and lumbering • Automobile • Consumer goods • Housing • Farming • Agriculture suffered the most • Coolidge vetoed the bill enabling price-supports • Gov’t buying of surplus crops that they would sell on the world market

3. Economic Troubles • By the late 1920s, Americans were buying less • Rising prices • Stagnant wages Unbalanced distribution of income • Rich got richer / poor got poorer • The wealthiest 1% of the population rose by 75% / only 9% increase for the majority of Americans • Overbuying on credit

4. Economic Troubles • Unrestrained buying and selling • The Stock Market • The buying and selling of company stocks • Dow Jones Industrial Average • A measure based on the stock prices of 30 representative large firms • Many people invested in the 1920s but engaged in • Speculation • Buying on the margin

5. The Stock Market Crashes • Black Tuesday • Stock prices plunged • Shareholders tried to sell out before the prices fell even lower • 16.4 million stocks were sold • Many people who bought stocks on credit found themselves in huge debt • Many people lost their savings

6. Financial Collapse • Bank and business failures • Banks • After the crash, panic caused people to withdraw their money from the banks • By 1933, 11,000 of the nations 25,000 banks had failed • Because bank accounts weren’t insured, millions of people lost their savings • Businesses • 90,000 businesses went bankrupt • GDP cut in ½ • Millions lost their jobs

7. Crisis at Home and Abroad • 1930 – Congress passed the Hawley – Smoot Tariff Act • Highest protective tariff in US history • Meant to protect American farmers and manufacturers but backfired • Many countries retaliated by raising their own tariffs • Within a few years, world trade fell by more than 40%