Download 1920s Economy

Late 1920s
Economy
14.3
“Wonderful Prosperity”
• Stock market value keeps increasing
– 1925 = $27 billion
– 1929 = $87 billion
• Average wages had
risen 40% since 1914.
– Unemployment < 4%
• Popular literature
– Jesus, the businessman (The Man Nobody Knows)
– “Everybody Ought to Be Rich” (article)
Other Positives
• Welfare Capitalism
– Meeting the needs of workers to prevent labor
strikes
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Higher wages
Paid vacations
Health plans
Recreation programs
English classes for
immigrants
Bad Signs
• Personal debt
– America’s personal debt rose ~70% during the 1920s.
– Buying fancy goods, but no money in the pocket
• Stock Market Speculation
– “Get rich quick” schemes
– Investments: high-risk, high-reward
• Buying on Margin
– Purchasing a stock for only a fraction (10%) of the value
– Borrow the rest of the money w/ high-interest loan
– When (if) stock value increases, sell & pay off loan.
Bad Signs
• Overproduction of goods
– Overstocked warehouses
• Farmers / rural banks fail
– President Coolidge vetoed any gov’t aid to farmers.
– Banks failed when farmers could not pay back loans.
• Uneven distribution of wealth
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Mainly, the rich got richer.
71% lived below the “minimum standard of living.”
80% of all families had no savings.
60% of the time, it works every time.
How bad could it be?
Pretty bad.