False Sense of Prosperity

1
False Sense of Prosperity

• Mood of America optimistic about future
• Medical advances life expectancy up 10 years
• Infant mortality down
• Standard of living was improving!

2

• Hoover is admired as president (self-made
  millionaire food relief in WWI)
• Laissez-faire economics appeared to be working
  well
• Stock Market up, values up (1925 27 billion,
  in 1928 alone value rose 11 billion)
• From 1921-1929 GNP rose 6 per year (previous
  decade 1) total value of good and services a
  country produces annually
• National income rose from 58 billion in 1921 to
  83 billion in 1929.

3
Herbert Hoover
4
Signs of Weakness in Economy

• Big business is booming (number of millionaires
  doubles in 20s) small businesses are being
  wiped out
• Gap between rich an poor growing rapidly
• Disparity between management labor grew
• 1929, 200 large companies held 49 of American
  Industry
• 1929, 24,000 families (0.1) had incomes of more
  than 100,000
• Also held 34 of nations total savings

5

• 71 of families earned less than 2,500
• 80 of all families had no savings
• Tax cuts to the wealthiest were given (so not to
  hinder further business expansion) but hurt small
  business

6
Personal Debt Rises

• Buying on Credit easier to purchase things
  debt soars spending declines
• Personal debt 1920 48 billion
• 1929 72 billion
• People unable to manage credit, poor investing,
  etc.
• Heavy focus on the present and no concern for the
  future will lead to depression in 30s.

7
Demand For Backbone Industries Down

• Textiles are losing out to foreign competition
• Japan, China, India, Latin America
• Coal mining is losing out to new energy sources
• Electricity expanding, hydro-power, natural gas,
  fuel-oil

8

• Railroads losing to new forms of transportation
• Automobiles, trucks, buses

9

• Home Construction is down (25 between 1925-1929)
• Led to decrease in other businesses (raw
  materials, furnishings, appliances)

10

• Agriculture is struggling
• During WWI, demand was high, drops 50 after war
• Farmers going into debt (lost market, huge
  surplus)
• Farms close, rural banks close (couldnt receive
  payments for wartime debts/loans)
• 6,000 rural banks close during the 20s

11
Playing the Stock Market

• Speculation high risk investments in hopes of
  huge returns, due to soaring stock values
• Buying on Margin purchase a stock for just a
  fraction of its price (10 to 50), borrow the
  rest
• Encourages less wealthy investors
• Brokers then charged high interest rates and
  could demand payment at any time

12
Market Crashes

• Loss of confidence average investor sold fast
  stock market prices fell fast
• October 29, 1929, Black Tuesday the market
  falls out
• The Roaring 20s comes to a halting stop!