Economic Boom

1
Economic Boom Bust
2
Warren G. Harding

• 1865 1923
• 29th President (1921-3)
• Elected on a campaign of a Return to Normalcy
  a return to isolationism, less social reform, and
  increased economic growth
• Harding was an honest man, but put too much trust
  in his friends and political allies, giving them
  positions in his cabinet
• Died in office from a massive heart attack,
  possibly brought on by the stress of scandals

3
The Ohio Gang

• Hardings corrupt friends from back home came to
  be called the Ohio Gang
• They abused their positions by accepting bribes,
  illegally selling government property
• Harding was deeply embarrassed by the actions of
  his friends
• Most notorious member was Secretary of the
  Interior Albert B. Fall

4
Teapot Dome Scandal

• Sec. Fall had secretly leased federal lands to
  private oil companies in return for 300,000 in
  bribes
• When the scandal broke, Fall became the first
  cabinet member to go to prison and Hardings
  reputation was ruined

5
Calvin Coolidge

• 1872 1933
• 30th President (1923-9)
• Became President upon Hardings death
• Known as Silent Cal for his terse, serious
  manner
• The business of the American people is
  business Coolidge supported businesses and a
  laissez-faire economy

6
Andrew Mellon the Mellon Program

• 1855 1937
• Sec. of Treasury to 3 Presidents
• His program included applying business principles
  to managing the federal budget
• Believed that economic growth required balancing
  the budget, reducing the federal deficit, and
  cutting taxes

7
Economic Boom

• Rise in the standard of living during the 1920s
  led to increased sales of consumer goods which in
  turn created more jobs
• Mechanization of factories led to greater
  efficiency and a drop in prices for manufactured
  goods, further encouraging consumerism

8
Consumer Credit

• For the first time, individuals began to
  regularly borrow money and go into debt to
  purchase consumer goods (cars, appliances,
  radios, etc.) because credit became easy to come
  by and carried no social stigma
• Consumers began to use installment plans to buy
  expensive items

9
Growth of the Middle Class

• As corporations began to expand and have
  specialized departments such as sales, marketing,
  accounting, engineering, and management, the
  number of people living at the middle-class level
  grew tremendously

10
Welfare Capitalism

• Companies began allowing workers to buy shares of
  stock, participate in profit sharing, and receive
  benefits such as medical care and pensions
• This led to increased spending among the working
  class and less reliance on unions, since they no
  longer seemed necessary

11
Farmers in Crisis

• Technological advances such as pesticides and
  tractors led to both higher crop yields and
  increased debt for farmers
• Increased crop yields led to a drop in crop
  prices
• Government efforts to help farmers were
  repeatedly vetoed by Pres. Coolidge, who believed
  in laissez-faire

12
Election of 1928

• Coolidge decided to not run for re-election,
  instead supporting his Sec. of Commerce Herbert
  Hoover as the Republican nominee
• Democrats ran NY Gov. Alfred E. Smith, the first
  Catholic to run for President
• Hoover won in a landslide

13
Herbert Hoover

• 1874 1964
• 31st President (1929-33)
• Took office at a time of unparalleled prosperity
  and optimism, but by the end of his presidency,
  the US was at the bottom of its deepest economic
  depression in history

14
Stock Speculation

• A long period of growth in the stock market
  convinced millions of Americans to take a risk
  and invest in stocks
• Investors began buying on margin borrowing
  the money to buy stocks, believing those stocks
  would grow in value and allow them to easily
  repay the loans but, if prices dropped, they
  panicked and sold quickly to avoid taking large
  losses

15
Black Tuesday

• In late October, 1929 stock prices began to slip,
  triggering a mass sell-off as investors panicked
• On Tuesday, Oct. 29 the bottom fell out the
  market lost 15 billion in a single day
• The market continued to plunge for the next 3
  years and didnt recover until after WWII a
  period known as the Great Depression

16
Banking Collapse

• Banks had made numerous loans to stock
  speculators and had also invested heavily
  themselves in the stock market
• When the market collapsed, banks lost big and had
  to stop lending
• With credit restricted, the economy went into a
  recession
• Many banks could not absorb their losses and
  closed people who had deposited their money in
  these banks lost everything this caused further
  panic and people began to withdraw their money
  from banks

17
Hawley-Smoot Tariff

• Tariff Act of 1930
• Government passed the 2nd highest tariff in US
  history in an attempt to protect US industry, but
  the tariff badly hurt the sale of US goods
  overseas as foreign nations raised their tariffs
  against the US
• This worsened the US economic situation

18
Rugged Individualism vs. Direct Relief?

• US had long believed in rugged individualism
  the idea that it was up to the individual to take
  care of himself
• As the economy collapsed and unemployment soared,
  people began to support the idea of direct
  relief the government should act to help those
  who could no longer help themselves