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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 • • • • • 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 – – – – 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.