Download Ch 16-3 Ch 17

Ch 16 Sec 3: Policies of Prosperity
•
supply side economics – the belief that if the taxes of the
wealthiest Americans are cut they will use that money to
invest in the economy and it will “trickle down” to others
•
isolationism – American investors caution towards
investing in a war torn Europe and putting “America First”
•
Dawes Plan – American banks made loans to Germany so
they could pay war reparations to England and France who
used the money to pay America back for WWI loans.
•
Kellogg-Briand Pact– treaty signed in 1928 that “outlawed
war”
•
Bull market – a long period of rising stock prices
•
Buying on margin – buying stock on credit by putting little
money down and using a bank loan to invest in the stock
market. As the stock prices falls, banks make margin calls
•
speculation - investing in the stock market based on the
performance of the stock rather than the performance of the
company (looking for a quick profit)
Chapter Objectives
Section 3: The Policies of Prosperity
• Explain Andrew Mellon’s economic strategies
for maintaining prosperity. 
• Describe how the United States remained
involved in world affairs without joining the
League of Nations.
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Promoting Prosperity
• Andrew Mellon, named secretary of treasury by
President Harding, reduced government spending
and cut the federal budget.
• The federal
debt was
reduced by
$7 billion
between
1921 and
1929.
(pages 521–522)
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Promoting Prosperity
• Secretary Mellon applied the idea of supply-side
economics to reduce taxes.
• This idea suggested that lower taxes would allow
businesses and consumers to spend and invest their
extra money, resulting in economic growth.
• In the end, the
government
would collect
more taxes at
a lower rate.
(pages 521–522)
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Trade and Arms Control
• By the 1920s, the United States was the dominant
economic power in the world.
• Allies owed the U.S.
billions of dollars in war
debts.
• Also, the U.S. national
income was far greater
than that of Britain,
Germany, France, and
Japan combined.
• Many Americans favored
isolationism rather than
involvement in
international politics and
issues.
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(pages 522–524)
Trade and Arms Control (cont.)
• Americans wanted to be left alone to pursue
prosperity.
• The United
States, however,
was too powerful
and
interconnected in
international
affairs to remain
isolated.
(pages 522–524)
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Trade and Arms Control (cont.)
• Other countries felt
the United States
should help with the
war’s financial debt.
• The United States
government
disagreed, arguing
that the Allies had
gained new territory
and received
reparations, or huge
cash payments that
Germany paid as
punishment for
starting the war.
(pages 522–524)
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Trade and Arms Control (cont.)
• Reparations crippled the German economy.
• As a result, Charles G.
Dawes, an American
diplomat and banker,
negotiated an agreement–
the Dawes Plan–with
France, Britain, and
Germany by which
American banks would
make loans to Germany so
they could meet their
reparation payments.
• France and Britain agreed
to accept less reparations
and pay more on their war
debts.
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(pages 522–524)
Trade and Arms Control (cont.)
• The Washington Conference held in 1921 invited
countries to discuss the ongoing post-war naval arms
race.
• Secretary of State Charles Evans Hughes proposed
a 10-year moratorium, or pause, on the construction
of major new warships.
(pages 522–524)
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Trade and Arms Control (cont.)
• The conference did nothing to limit land forces.
• Japan was angry that the conference required Japan
to keep a smaller navy than the United States and
Great Britain.
A battleship ratio was achieved through this ratio:
US
Britain
Japan
France
Italy
5
5
3
1.67
1.67
Japan got a guarantee that the US and Britain would stop
fortifying their Far East territories [including the Philippines].
Loophole  no restrictions on small warships
(pages 522–524)
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Trade and Arms Control (cont.)
• The Kellogg-Briand Pact was a treaty that outlawed
war.
• By signing the treaty,
countries agreed to stop
war and settle all
disputes in a peaceful
way.
• On August 27, 1928, the
United States and 14
other nations signed it,
and eventually 62 nations
ratified it.
• The treaty had no binding
force, but it was hailed as
a victory.
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(pages 522–524)
The Tomb of the Unknown Soldier On March 4, 1921, Congress
approved the burial of an unidentified World War I soldier in
Arlington National Cemetery on a hill that overlooks Washington,
D.C. This burial site, which was dedicated on November 11, 1921,
is called the Tomb of the Unknown Soldier.
In 1958 two unknown soldiers from World War II and the Korean
War were buried alongside the original unknown soldier. In 1984 a
Vietnam War soldier was added.
On the side of the original tomb are inscribed the words: “Here
rests in honored glory an American soldier known but to God.” The
Tomb is guarded year-round, day and night, regardless of weather.
The identities of the three other soldiers buried in the Tomb of
the Unknown Soldier are, in fact, unknown. In 1998, however, DNA
analysis allowed the Vietnam War soldier buried there to be
identified. He is U.S. Air Force First Lieutenant Michael Joseph
Blassie.
Chapter Objectives
Section 1: Causes of the Depression
• Describe the characteristics of the 1920s
stock market.
• Identify the causes of the Great Depression.
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The Election of 1928
• Herbert Hoover (R) former head of the Food
Administration and Secretary of Commerce
• Alfred E. Smith (D) four-time governor of New York
and the first Roman Catholic to be nominated for
president.
(pages 530–531)
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The Election of 1928
• The issue of Prohibition played a major role in the
campaign.
• Hoover favored a ban on liquor sales.
• Smith opposed the ban.
(pages 530–531)
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The Election of 1928 (cont.)
• Religious
differences
between the
candidates had a
major effect on
the campaign.
• The Catholic
issue led to a
smear
campaign
against Smith.
(pages 530–531)
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The Election of 1928 (cont.)
• The Republicans took full credit for the prosperity of
the 1920s, and Herbert Hoover easily won the 1928
election by a landslide.
(pages 530–531)
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The Long Bull Market
• The stock market was established as a system for
buying and selling shares of companies.
(pages 531–532)
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The Long Bull Market
• A long period of rising stock prices is known as a
bull market.
• Prosperous times during the 1920s caused many
Americans to invest heavily in the stock market.
(pages 531–532)
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The Long Bull Market
• A normal business cycle has highs (peak) and lows
(trough).
• To keep it steady, neither should last too long.
(pages 531–532)
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The Long Bull Market (cont.)
• As the bull market continued to go up, many
investors bought stocks on margin, making a small
cash down payment.
(pages 531–532)
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The Long Bull Market (cont.)
• This was considered safe as long as stock prices
continued to rise.
• If the stock began to fall, the broker could issue a
margin call demanding that the investor repay the
loan immediately.
(pages 531–532)
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The Long Bull Market (cont.)
• In the late 1920s, new investors bid prices up without
looking at a company’s earnings and profits.
• Speculation occurred
when investors bet on
the market climbing
and bought whatever
stock they could in an
effort to make a quick
profit.
(pages 531–532)
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