The Nation’s Economy
(Ch. 14, Sec. 1)
1. Industries Struggle As Demand Drops
2. Credit Leads to Financial Crisis
3. Financial Collapse Follows Stock
Market Crash
What key industries struggled as
demand dropped in the late 1920’s?
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Railroads (trucks, buses, cars)
Coal mining (electricity, fuel oil, natural gas)
Housing starts (hurt construction & lumber)
Steel, textiles, autos, and consumer goods
Farmers: crop prices dropped 40 %, McNaryHaugen bill (price supports) vetoed (Coolidge),
banks foreclosed on many farms (equipment)
How did extension of credit lead to a
financial crisis?
• More than 70% of families earned around $2,500
a year (prices rose faster than wages)
• Many simply bought goods on credit until they
buried themselves in debt
• Most consumers were forced to cut back on
spending (debt)
• Dow Jones Industrial Average (stock market
barometer) rose sharply (“bull market”)
• Americans rushed to buy stocks (speculation led
to buying of stocks on margin)
What fueled the financial collapse that
followed the stock market crash?
• Stock prices peaked in Sept. 1929, then began to
fall (panic led to Black Tuesday, Oct. 29th)
• Many banks (invested in stocks) closed & millions
of people lost their life’s savings
• 90,000 businesses went bankrupt (including
automobile & railroad companies)
• Unemployment rose to 25% as millions lost their
jobs
• Tariffs (Hawley-Smoot) led to reduction in foreign
trade (exports)