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14.1 The Nation's Sick Economy

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Daniel Garza

on 6 February 2013

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Transcript of 14.1 The Nation's Sick Economy

Lecture 14.1 The Nation's Sick Economy As the prosperity of the 1920s ends, severe economic problems grip the nation. Summarize the critical problems threatening the American economy in the late 1920s.
Describe the causes of the stock market crash and Great Depression.
Explain how the Great Depression affected the economy in the United States and throughout the world. LEARNING TARGETS Economic Troubles on the Horizon Industries in Trouble Key industries like railroads, textiles, steel barely make profit Mining, lumbering expanded during war; no longer in high demand (war is over) Coal especially hard-hit due to availability of new energy sources Boom industries—automobiles, construction, consumer goods— now weak because of over-production Housing starts decline Farmers Need a Lift International demand for U.S. grain declines after war - prices drop by 40% or more Farmers boost production to sell more; prices drop further Farm income declines; farmers default on loans; rural banks fail Price-supports—government buys surplus crops, guarantees prices - Coolidge vetoes price-support bill Consumers Have Less Money to Spend People buy less due to rising prices, stagnant wages, credit debts Living on Credit Many people buy goods on credit (buy now, pay later) Businesses give easy credit; consumers pile up large debts Consumers have trouble paying off debt, cut back on spending Uneven Distribution of Income In 1920s, rich get richer, poor get poorer 70% of families earn less than minimum for decent standard of living Most cannot afford flood of products factories produce Hoover Takes the Nation The Election of 1828 Dreams of Riches in the Stock Market Democrat Alfred E. Smith—four times governor of New York Republican Herbert Hoover gets overwhelming victory Dow Jones Industrial Average tracks state of stock market 1920s, stock prices rise steadily; people rush to buy stocks, bonds. Many engage in speculation, buy on chance of quick profit. Buying on Margin - pay small percent pay rest later Black Tuesday September 1929 stock prices peak, then fall; investors begin selling October 29 or Black Tuesday, market, nation’s confidence plummet Shareholders sell frantically; millions of shares have no buyers People who bought on credit left with huge debts Others lose most of their savings The Stock Market Crashes Financial Collapse Bank and Business Failures Great Depression—economy plummets, unemployment skyrockets
- lasts from 1929–1940 After crash, people panic, withdraw money from banks Banks that invested in stocks fail; people lose their money 1929–1932, gross national product cut nearly in half
- 90,000 businesses go bankrupt 1933, 25% of workers jobless; those with jobs get cuts in hours, pay Worldwide Shock Waves Great Depression limits U.S. ability to import European goods Hawley-Smoot Tariff Act sets highest protective tariff ever in U.S. Other countries cannot earn American currency to buy U.S. goods International trade drops; unemployment soars around world Causes of the Great Depression Factors leading to Great Depression:
- tariffs, war debts, farm problems, easy credit, income disparity Federal government keeps interest rates low, encourages borrowing THE
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