ECONOMIC PROBLEMS OF THE ECONOMIC PROBLEMS OF THE 1920s1920s

Overproduction. Overproduction. – Industry produced more than people bought. Industry produced more than people bought.

Declining demand for products. Declining demand for products. "Junk Stocks." "Junk Stocks."

– Some stocks were for businesses that produced no goods, but Some stocks were for businesses that produced no goods, but were set up just to sell stock certificates. were set up just to sell stock certificates.

Speculative Investing. Speculative Investing. – People invested in companies with the idea of selling the stock People invested in companies with the idea of selling the stock

when its value went up instead of holding it to earn dividends. when its value went up instead of holding it to earn dividends.

ECONOMIC PROBLEMS OF THE ECONOMIC PROBLEMS OF THE 1920s1920s

Poor Banking Practices. Poor Banking Practices. – The government did not adequately regulate the banks' use of depositors' The government did not adequately regulate the banks' use of depositors'

savings accounts to speculate in the stock market. savings accounts to speculate in the stock market. – Savings accounts were not insured. If the bank failed, the depositors lost Savings accounts were not insured. If the bank failed, the depositors lost

their savings. their savings. Declining prices and demand for crops. Declining prices and demand for crops.

– Farmers had increased production during World War I. Farmers had increased production during World War I. – The demand for crops was less after the war, but production was still up. The demand for crops was less after the war, but production was still up.

As crop prices fell, the farmers lost purchasing power. As crop prices fell, the farmers lost purchasing power. Unemployment due to technology. Unemployment due to technology.

– Fewer Americans produced more goods. Workers were laid off. Fewer Americans produced more goods. Workers were laid off. Installment buying. Installment buying.

– People went into debt. When they could not pay debts, the businesses lost People went into debt. When they could not pay debts, the businesses lost money.money.

““Get Rich Quick”: The Speculative ManiaGet Rich Quick”: The Speculative Mania Stock market speculating—buying a stock and expecting to Stock market speculating—buying a stock and expecting to

make money by selling it at a higher price—ran rampant as make money by selling it at a higher price—ran rampant as

more people saw the stock market as a certain route to riches.more people saw the stock market as a certain route to riches.

Just as Americans bought their cars and radios on the Just as Americans bought their cars and radios on the installment plan, some also bought stock on credit—this was installment plan, some also bought stock on credit—this was called buying on the margin.called buying on the margin.

““Get Rich Quick”: The Speculative ManiaGet Rich Quick”: The Speculative Mania Driven partly by real economic growth and partly by Driven partly by real economic growth and partly by

speculation, stock prices rose higher and higher.speculation, stock prices rose higher and higher.

Huge credit problems Huge credit problems Steady stream of bank failures in late 1920s as Steady stream of bank failures in late 1920s as

customers (many of them farmers) were unable customers (many of them farmers) were unable to pay mortgages to pay mortgages

Many bankers had small reserves as they Many bankers had small reserves as they attempted to capitalize on stock market growth. attempted to capitalize on stock market growth.

Other CausesOther Causes Massive business inventories (up 300% Massive business inventories (up 300%

from 1928 to 1929) from 1928 to 1929) Lack of diversification in American Lack of diversification in American

economy--prosperity of 1920s largely a economy--prosperity of 1920s largely a result of expansion of construction and result of expansion of construction and automobile industriesautomobile industries

Poor distribution of purchasing power Poor distribution of purchasing power among consumersamong consumers – What does the above point mean?What does the above point mean?

Many farmers and factory workers were Many farmers and factory workers were unable to purchase cars and houses and unable to purchase cars and houses and thus maintain economic growththus maintain economic growth

Farm income declined 66% from 1920 to Farm income declined 66% from 1920 to 1929 1929

By 1929 the top 10% of the nation's By 1929 the top 10% of the nation's population received 40% of the nation's population received 40% of the nation's disposable incomedisposable income

Decline in demand for American Decline in demand for American goods in international tradegoods in international trade

• US demand for farm products from Europe Decreased

• Some nations, like Germany fell on economic hard times, unable to purchase from the US

• Unable to pay wartime debts, many European nations borrowed from American banks, further increasing indebtedness

• High American protective tariffs discouraged trade

Stock Market Crash, 1929Stock Market Crash, 1929 By October 1929, margin buying had reached $8.5 billion in By October 1929, margin buying had reached $8.5 billion in

loans to stock purchasers loans to stock purchasers Stock prices began to fall in September 1929. On October Stock prices began to fall in September 1929. On October

24 (Black Thursday) and October 29 (Black Tuesday), prices 24 (Black Thursday) and October 29 (Black Tuesday), prices fell drastically as sellers panicked. By December $40 billion fell drastically as sellers panicked. By December $40 billion in stock value had been lost. in stock value had been lost.

Hoover and business leaders attempted to calm Americans Hoover and business leaders attempted to calm Americans by assuring them that the country's economy was by assuring them that the country's economy was fundamentally soundfundamentally sound

J.P. Morgan and other bankers bought $20 million of U.S. J.P. Morgan and other bankers bought $20 million of U.S. Steel to try to restore confidence Steel to try to restore confidence

Economic downturn accelerated by market Economic downturn accelerated by market

crashcrash Between 1929 and 1933, 100,000 businesses failed Between 1929 and 1933, 100,000 businesses failed Corporate profits fell from $10 billion to $1 billon Corporate profits fell from $10 billion to $1 billon Between 1929 and 1933, over 6000-9000 banks failed with Between 1929 and 1933, over 6000-9000 banks failed with

over 9 million savings accounts lost ($2.5 billion) over 9 million savings accounts lost ($2.5 billion) By 1933, 13 million workers were unemployed (25% of the By 1933, 13 million workers were unemployed (25% of the

work force) and many were underemployed work force) and many were underemployed Malnutrition increased, as did tuberculosis, typhoid and Malnutrition increased, as did tuberculosis, typhoid and

dysentery.dysentery. – In 1932, 95 people died in New York City from starvationIn 1932, 95 people died in New York City from starvation – Many turned to soup kitchens and breadlines for foodMany turned to soup kitchens and breadlines for food

Bread line. Bread line.

Serving for a bread line. Serving for a bread line.

Being served in a soup Being served in a soup kitchen. kitchen.

Man eating in soup kitchen. Man eating in soup kitchen.

Hardship & Suffering during the Hardship & Suffering during the DepressionDepression

Family ProblemsFamily Problems Living conditions changed when multiple families crowded into small houses Living conditions changed when multiple families crowded into small houses

or apartments or apartments Divorce went down because couples could not afford separate households and Divorce went down because couples could not afford separate households and

others postponed wedding plans others postponed wedding plans Unemployed men felt like failures when they could not support their families Unemployed men felt like failures when they could not support their families

and lost their status when they saw their wives and children working to the point and lost their status when they saw their wives and children working to the point when they were too ashamed to get relief or help from friends when they were too ashamed to get relief or help from friends

Women were blamed for taking the jobs of men and in 1931, the Federation of Women were blamed for taking the jobs of men and in 1931, the Federation of Labor even endorsed it Labor even endorsed it

Women continued to work doing “women’s work?such as nursing, and even if Women continued to work doing “women’s work?such as nursing, and even if they were able to get an industry job which seldom hired women, they usually they were able to get an industry job which seldom hired women, they usually were paid less than men were paid less than men

Hardship & Suffering during the Hardship & Suffering during the DepressionDepression

Hardship & Suffering during the Hardship & Suffering during the DepressionDepression

Selling ties on the street

Hardship & Suffering during the Hardship & Suffering during the DepressionDepression