14.1 Problems at the End of the 1920s

Economic Problems• 1920s businesses boomed but problems

lurked beneath– Steel, railroads, and coal mining businesses all

weakened– Farmers were able to plant a ton of their crops• Crop prices fell, Coolidge vetoed bills that would

have helped guarantee farmers a better price

Economic Problems• Prices on goods like radios,

cars, etc. kept going up but wages weren’t increasing– Buying stuff on credit (w/

installment plans) meant many people bought more than they could afford.• Some people even used credit

to buy stocks (buying them “on margin”)

Economic Problems• The income gap (difference between the

best paid workers and the rest of us) grew significantly– Top 1% made $10,000 and over– Bottom 70% made below $2,500

Economic Problems• In the 20s, the New York Stock Exchange boomed– Stock: a small piece of a company you can buy/sell• Mr. Phelps’ stock market tip: buy when the stock’s price is

low, sell it when it is high• There is always a risk the price could go down.

– People would speculate that stock prices would keep going up (and never go down)

The Crash• Stock prices reached their peak in Sept. 1929• Black Tuesday: Oct. 29, 1929, “everyone” tried to

frantically sell their stocks– But who was going to buy them???– Many people lost their life savings gambling in stocks– …and thus the Great Depression started

The Crash• Banks and businesses failed in record numbers– “Bank run”: when everyone goes to the bank at

once to withdraw their money, which banks can’t handle• Banks loan out part of your money to people. That is

their business

The Crash

• The rest of the world felt the crash too– Hitler rose to power in Germany by blaming

Germany’s problems on other countries and the Jews

The Crash

• U.S. tried to protect American businesses with…– The Hawley-Smoot Tariff, extremely high tariff rates– European countries responded by protecting their

businesses with high tariffs too

Summing it up• Who should we blame?!• The Government!– They made it easy for companies & people to

build up debt

• The Rich!– They were the ones making all the money &

calling the shots

• The Rest of Us!– We went into debt buying all that dumb stuff on

credit.