Economy in the 1920s
USH-1: Chapter 14, Section 3
“Wonderful Prosperity”
  Hoover now President
  Stock market value soaring
  Stock market was widely regarded as the nation’s
economic “weathervane”
  Stock market hits $87 billion October of 1929
  Working wages goes up 40% since 1914
  High confidence in business
  New literature such as The Man that Nobody Knows and
“Everybody Ought to be Rich” convinced Americans
to take business risks
Welfare Capitalism
  Caused by Post-War economy stabilization
  Definition: New approach to labor relations
  Employers raised wages, benefits – i.e. paid vacations,
health plans, recreation programs
  Wanted to boost loyalty and morale
Economic Danger Signs
  Uneven prosperity – only rich got richer, huge
companies dominated industry
  Government tax policy cut taxes to the rich
  Americans personal debt growing
  Being accustomed to credit spending
  New products coming on the market (i.e. vacuums,
refrigerators, radios, etc.)
Economic Danger Signs (cont.)
  “Get Rich Quick” attitude prevailed
  People enjoyed partaking in high-risk investments
based off of speculation
  More “ordinary” people involved in the stock market
  Buying on a margin – allowed investors to purchase a
stock for only a fraction of the price and borrow the
rest
Too Many Goods, Too Little Demand
  Rising productivity created a problem because there
were more goods then consumers would buy
  Overproduction caused industries to slow
  See economies such as steel, rubber, and housing fall
Trouble for Farmers and Workers
  Farmers are unable to repay the debt borrowed for
buying machinery
  6,000 rural banks closed in the 1920s
  McNary-Haugen Farm Relief Bill
  Designed to increase prices farmers received for their
crops
  Blocked by President Coolidge twice
  See a growing unemployment rate and business
depression