Download Economics of the 1920s

BELL RINGER
• Use your phone to research the following:
• What is “economics?”
• List 3 examples of what causes the economy
to grow?
OBJECTIVES
• Cite and explain evidence that led to the transition of the U.S.
economy from laissez-faire capitalism to an increasingly
regulated economy.
• Analyze and evaluate historical arguments regarding monetary
policy.
• Critique the government‘s use of tariffs and trade agreements.
POLITICS OF THE 1920S
Harding to Coolidge
WARREN HARDING
• Born in Ohio in 1865
• Elected to one term in the U.S. Senate
• Runs in 1920 under the campaign slogan of “Return to
Normalcy”
• Chose CALVIN COOLIDGE as his running mate for VP.
WARREN G. (HARDING)
WARREN G’S HOMIES: THE
OHIO GANG
• Harding made some good appointments to his
cabinet:
• Herbert Hoover – Secretary of Commerce
• Andrew Mellon – Secretary of the Treasury
• However, some were not so good…
• The “Ohio Gang” – Many cabinet posts were given to
his buddies from home. These guys sold government
jobs, pardons, etc.
• Harding often didn’t have any clue what they were
doing.
• Charles R. Forbes, who ran the Veterans Bureau sold
medical supplies and kept the money for himself –
costing the U.S. over $200 million.
TEAPOT DOME SCANDAL
• Harding’s Sec. of the Interior ALBERT FALL leases land
with U.S. oil reserves to private interests in TEAPOT
DOME, WY and ELK HILLS, CA.
• Fall gets $300,000 in bribes for doing this.
• Fall becomes the first cabinet officer to go to prison.
“SILENT CAL” COOLIDGE
• On a trip out west in 1923, Harding has a heart attack
and dies. This happens just before the news about the
scandals breaks.
• Calvin Coolidge – from Vermont – takes over.
• He quickly got rid of many of Harding’s corrupt friends,
but kept Mellon and Hoover on staff.
CAL COOLIDGE
COOLIDGE IN OFFICE
• Coolidge was PRO-BUSINESS. He thought that
the gov’t should stay out of business’s business
as much as possible.
• He wanted a SMALL GOV’T with little
bureaucracy.
“The chief business of the American people is
business. The man who builds a factory builds
a temple. The man who works there worships
there.”
~Calvin Coolidge, 1925
ELECTION OF 1924
• Coolidge wins in 1924 easily over John W. Davis
(Democrat) and Robert M. La Follette (new Progressive
Party).
• La Follette was a Senator from Wisconsin, but got only
17% of the popular vote.
• Coolidge serves for 4 more years and give the U.S. the
“normalcy” that Harding promised.
ECONOMICS OF THE 1920S
Boom to Crash
ECONOMICS FOR SOUTHERN BLACKS
• Many black citizens in the
South were tied to the
land through a system of
“sharecropping.”
• Sharecroppers paid rent
to land owners by giving
them a large percentage
of their crop.
• Economics and Racism
gave many Southern
blacks a strong incentive
to try and escape this life.
ECONOMICS IN THE NORTH
• After World War I, Northern
cities were booming
industrial centers.
• Racism and prejudice
towards blacks was slightly
less prevalent in the North
as well.
• Many Southern blacks will
take this opportunity to
escape the prejudices of
life in the South and seek
job opportunities in the
North.
• This is the “Great
Migration.”
MASS PRODUCTION AND CONSUMERISM
• Henry Ford’s use of the
assembly line is adopted by most
American industries.
• As a result American
manufacturing output increases
at a dramatic rate during the
1920s.
• With the availability of cheap
goods America becomes a
massive consumer society and
the economy booms.
•
People were buying cars, radios,
electric ice-boxes, fans, vacuum
cleaners…
AGRICULTURAL OVERPRODUCTION
• Farmers bought more land
and more machines
accruing more debt in the
process.
• With more land and more
machines farmers began to
overproduce.
• This naturally forced the
price of agricultural
products down.
BUYING ON CREDIT
• People began purchasing
luxury items on credit and
racking up huge debt.
BUYING ON MARGIN
• People began buying
stocks with money they
borrowed from a broker
thinking that they would pay
off the loan when they sold
the shares.
BOOM
• American manufacturers
are mass producing goods.
• American consumers are
buying tons of stuff, much
of it on credit.
• Farmers are producing
massive amounts of
agricultural products.
• People speculate that the
stock market will continue
to grow indefinitely and
make risky decisions.
CRASH
•
The optimism and financial gains of the
great bull market were shaken on
September 18, 1929, when share prices
on the New York Stock Exchange (NYSE)
abruptly fell.
•
People were scared of the Smoot-Hawley
Tariff being passed, which raised tariff
rates.
•
Fearing what the Tariff might do to their
stocks people began rapidly selling their
stocks.
•
Other countries might retaliate by raising
their tariffs and decreasing U.S. exports
and hurt American business.
CRASH
Black Tuesday
• October 29, 1929,
• Rumor was that U.S. President
Herbert Hoover would not veto
the pending Smoot–Hawley
Tariff Act
• 16 million shares were traded,
and the stock market lost an
additional 30 points, or 12%
IN SUM
• The Twenties were a time of
extravagant living.
• Major Causes of the Crash
and Depression:
• Overproduction/Falling
Prices
• Buying goods on credit
• Speculating
• Buying stocks on margin.
THE GREAT DEPRESSION BEGINS