Politics and Market Speculation
(TOK)
Politics
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The new freedom of economy and lifestyle
allowed politicians to focus on social and
cultural issues
People wanted to end labor problems and
racial strife, they wanted less immigration,
conservative politics, and less government
interference
Elections- 1924 republicans won by a
landslide and again in 1928, republicans
were given credit for the economic boom
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Presidents in the 1920s
Woodrow Wilson (1913-1921)
Warren G. Harding (1921-1923)
Calvin Coolidge (1923-1929)
Herbert Hoover (1929-1933)
Key Government Politics
April 29, 1926- the United States and France reached an
agreement about World War I payments
 March 28, 1929- President Hoover created the SOCAL Act,
allowing 16 oil wells to be opened in Bahrain
 June 15 1929-President Hoover passes the Agricultural
Marketing Act of 1929 (TOK) establishing the Federal Farm
Board

◦ Intended to stop the downward spiral of crop prices by buying
crop surpluses and by lending money to farm organizations
◦ Money was loaned out to the farmers in order to buy seed and
food for their livestock
◦ The Federal Farm Board's purchase of surplus could not keep up
with the production because farmers realized that they could just
sell the government their crops, they boosted production
Social issues
• Prohibition- liberals and non-obeying leaders
• Isolationism- desire to keep other countries distant,
people had an xenophobic fear especially in rural
where the KKK was active
• Communism- people were hostile especially after the
Red Scare
• Ku Klux Klan- white supremacy and nationalism, no
immigration
The Dawes Plan
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Origin- a treaty enacted in
September of 1924
Purpose- to allow the Triple
Entente to collect war
reparation debts from
Germany (TOK)
Value- gives factual
documentation as to what the
world was expecting from
Germany as far as war
reparations
Limitation- it was written
without concern to Germany's
livelihood and therefore fails
to encapsulate the actual
situation in Germany
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Proposed by the Dawes Committee in 1924
Relied on money lent to Germany by a
consortium of American investment bankers
Went into effect in September 1924
In the mid-twenties German business
rebound, Germany was able to make prompt
payments
Since this plan solved an international crisis,
Dawes won a Nobel Peace Prize in 1925
Unfortunately the plan did not work and was
replaced, in 1929, by the Young Plan
Allies purposely set payments at to high (TOK)
Background
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Germany was required to pay twenty billion gold marks, then in
1921 told to pay 132 billion gold marks
1923- Germany defaulted on their ability to give more coal, timber,
and steel
 French and Belgian troops went into Germany to occupy the Ruhr River
Valley,
 This infuriated Germans, they tried to resist, which led to inflation

Hyper inflation in Germany
 Allied occupation of the Ruhr
 Crazy amount of demanded money
 Just got out of a war
Main Points
1.
2.
3.
4.
5.
The Ruhr area would be
evacuated by Allied troops
Reparation payments begin at
one billion for the first year,
increasing annually to two
and a half billion after five
years
The Reichsbank would be
recognized under Allied
supervision
Sources for reparation money
would include transportation,
excise, and custom taxes
The total loan from the
Unites states would equal 800
million dollars
Young Plan
Program for
settling German
reparation debts
 Written in 1929
and enacted at
second Hague
Conference in
January of 1930
 Committee headOwen D Young
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Reduced payments to 112 billion gold marks
and divided annual payment into two
1. Unconditional part- one third of the sum
2. Postpone able part- two thirds that, if not paid,
would gain interest and be and financed by
American investment banks

Called for international bank of settlements
to handle reparations
The Bank for International Settlements was
established
International organization of central banks which "fosters
international monetary and financial cooperation and
serves as a bank for central banks" (www.bis.org)
Since it is an international institution, it is not
accountable to any single national government
And then…
The Crash of 1929 occurred and the
American banking system was forced to
recall their money from Europe and
cancel credits which had made the Young
Plan possible
 The downfall in imports and exports
affected the entire world
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1933- two thirds of all world trade was gone
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German unemployment increased to33.7
percent
Rise of Materialism
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Materialism- tendency to consider material possessions and
physical comfort as more important than other values
1920s- culture grew from the enormous material abundance
Increased wages for middle class
Fabulous profits for investors
Machines transform conditions of everyday life
Culture became a commodity
 Radio and television become hugeeveryone could hear and see the same
things, this led to advertising as crucial
industry, which led to a mass demand for
products of mass consumption
 People saw no need to save, companies
allowed payment in installment plans

Borrowers overextend
Market Leverage
Margin buying- the buying of securities with cash
borrowed from a broker using other securities as
collateral
 Net value- the difference between the value of the
securities and the loan equals the amount of one’s
cash used
 Margin requirement was incredibly loose
 Many investors received margin calls, they had to
deliver more money to their brokers or their
shares would be sold
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People could not afford to pay, so their shares were
sold which lead to more market declines, which lead
to more margin calls (TOK)
Role of Income Distribution
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“The distribution of income lies at the heart
of an enduring issue in political economy—
the extent to which government should
redistribute income from those with more
income to those with less.”
Should the government redistribute income?
(TOK)
No one person distributes income, it is done
by decisions in people make in work,
savings, and investment
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Most of the money in the United States was
distributed between a few really rich people,
this unbalance of wealth led to an unstable
economy
Increased manufacturing output
Production costs quickly falling, wages slowly rising,
and prices remaining constant- profit went to the bosses
Vocabulary
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Dow Jones Industrial Average- indicator of
stock market prices, based on 30 blue-chip
stocks (stock market index)
Point system- weighted average price of 30
blue-chip stocks
Speculation- practice of engaging in risky
finance transactions in an attempt to profit
from short or medium-term fluctuations in
the mark value of a tradable good
Market value- whatever people will pay
Basics of the Stock Market
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Companies sell stocks in order to raise money
When one owns a share of stock, they have claim to
the company
As company earnings go up, investors become willing
to pay more for a share
As the economy grows, cooperate earnings grow, and
stock prices go up
The stock market grows at an average of ten percent
per year
The stock market is a long-term investment (TOK)
People liked the stock market because if a company
failed, one person, founder, investor, or stockholder
wouldn’t loose it all.
Crash of 1929
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Beginning in late October, most devastating in American history
◦ Signified the beginning of the ten year Great Depression (TOK)
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The Great Depression affected all Western industrialized countries
(TOK)
Post war optimism brought floods of people moving from rural areas
into the city in the hope to find a more prosperous life in growing
expansion of industrial sector
 Neglect in the agriculture industry, financial despair among farmers (TOK)
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People thought the stock market would always go up
Steel product, construction, and car sales were down
Consumers were building enormous debt because credit was so easy
Market had been on a nine year run, the Dow increased by ten times
reaching a peak of 381.17 on September third
September 18th- share prices in the New York Stock Exchange fell
The Market was unstable, switching between ridiculous amounts of
selling and trading to rising prices and recovery
“Black Days”
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October 24- Black
Thursday, the stock
market lost eleven
percent of its value
Wall Street Bankers
meet to find a solution
Richard Whitney acted
on their behalf
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October 28- Black
Monday, more
investors wanted out
(TOK), lead to another
slide and a record loss
of thirteen percent
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October 29- Black
Tuesday, sixteen million
shares were traded and
the Dow went down
twelve percent more
William C. Durant, the
Rockefeller family, and
other financial giants
bought enormous
amounts of stock to
demonstrate their
confidence in the stock
market

The market lost over
thirty billion dollars in
two days
October 30, the stock market regained twelve
percent
 November 13, the stock market hit interim bottom
 The stock market would not return to the September
third peak until November twenty-third, 1954
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Work Cited
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