The stock Market Crash of 1929

Vocabulary Depositor - A person that puts money into the bank. Borrower - A person that borrows money from the bank. Loan - When a person gets money from a bank and agrees to pay back the money with interest. Interest - A fee that the bank charges or pays out.

World War I ENDED After World War I what was Europe like?

Europe Europe was destroyed!

World War ENDED What was the U.S. like after World War I?

America after WWI America was booming because it was not hurt by the war, and big business was doing the best it had ever done! Why was big business doing so well?

America After WWI

America after the War People all over the country were opening new businesses because of the inventions of electricity, the assembly line, and of course steel! What kind of businesses were people opening?

Where did people get money to open businesses? Larry wants to open up a lamp business. Larry needs to buy a bunch of lamps, buy a store, and pay co-workers. Where does Larry get the money to open this business?

Larry

Larry the Lamp Man Larry doesn’t have a rich uncle so he has to borrow money from the bank! Larry takes a loan out from the bank.

Larry Larry decides he needs $20 to start his business. Larry borrows $20 and agrees to pay 20% interest on his loan. 20% of $20 = $4 ($20 x.20 = $4) $20 + $4 = $24 This means that in one year Larry has to pay $24 back to the bank.

Bank Where does the bank get the money to loan out to Larry?

Bank The bank gets money from depositors. Depositors put money in the bank because they get interest back at the end of the year.

Bank

Dana Dana the depositor puts in $20. The bank says that the bank will pay 10% interest on the money she has in the bank after one year. 10% of $20 = $2 ($20 x.10% = $2) $20 + $2 = $22 So after one year Dana’s $20 will be worth $22 because she put her money in the bank.

Dana

The bank needs Dana’s money to loan out to Larry so that Larry can start his business. However, the bank needs Larry to pay back the money to the bank so the bank can repay Dana.

After WWI After WWI, many people were making more money, so they saved in the bank. Also, many people wanted to start business so they went to the bank to borrow money.

PROBLEM The problem happened when the banks loaned out most of the money they got from the depositors to the borrowers.

Value of Companies In 1929, the stock market, a place where people can buy and sell pieces of a company, went down a lot because the true value of companies was not what people thought!

Black Tuesday On October 29, 1929, the stock market crashed! Values of many companies went down a lot!

Borrowers Because the value of companies went down, many of these businesses could not repay the banks the money that they borrowed? The banks didn’t have any money!

Banking Problem Why didn’t the banks have the money?

Banking Problem The banks loaned out all of the money to the borrowers.

Banking Problem HUGE PROBLEM! People that put money into the banks were not able to get their money back from the bank! People lost a lot of money!

Banking What happened to the depositors when they wanted their money back? What happened to the borrowers?

Rush on the Banks Many of the depositors rushed the banks to get whatever money the bank had before it was totally out of money! It was chaos!

Run on the Banks

Borrowers The borrowers (businesses) went out of business! The borrowers could not repay the loans they took out from the bank!

OH NO! Many business were closed A lot of people lost their jobs A lot of people were very poor because they did not have a job and they lost the money that they put into the bank!

The Warning Sign Farm prices drastically fall after WWI Farmers paid by gov. to make food for allies, creates a huge surplus Farmers unable to repay loans after gov. pulls WWI agricultural contracts 6,000 banks close out West What are the consequences? Pres. Hoover vetoes all bills to help farmers Laissez-Faire

Why was this bad? Credit system People didn’t really have the money they were spending WWI The U.S. was a major credit loaner to other nations in need Many of these nations could not pay us back

Herbert Hoover was president at the start Philosophy: We’ll make it! What He Did: Nothing The poor were looking for help and no ideas on how to correct or help were coming

Farmers were already feeling the effects Prices of crops went down Many farms foreclosed People could not afford luxuries Factories shut down Businesses went out Banks could not pay out money People could not pay their taxes Schools shut down due to lack of funds Many families became homeless and had to live in shanties

STOCK MARKET CRASH OF 1929

Vocabulary Stock Market - A place where people buy and sell parts of a company. The stock market determines how much a business is worth. Unemployment - The number of people that do not have jobs. A person who does not have a job is unemployed. Depression - A time where the economy is bad. A lot of businesses close and people do not have jobs. Debt - When a person owes more money than they have. Soup Kitchen - A place a person goes to get free food.

Background After World War I (1919), business was booming! Businesses were selling new inventions, helping rebuild Europe, and working around the clock. Banks were busy - people were depositing money, many business were borrowing money and taking out loans.

Stock Market Crash A bunch of people were opening up businesses, taking out loans, and hoping that they would be able to pay back their loans to the bank. Many businesses were not able to pay their loans back so the Stock Market Crashed! The stock market crashed on October 24, This day is known as Black Tuesday.

Example of a Business that Crashed! Stacy owned a school supply company called Stacy’s Supply. Before the stock market crashed, Stacy’s Supply was worth $25,000 After the stock market crash, on Black Tuesday, Stacy’s Supply was only worth $1,000. What do you think Stacy is going to have to do with her business?

Stacy’s Supply Company Stacy will have to close her factories Stacy will not be able to pay back her loans to the bank. Stacy will have to lay off (fire) her employees because she cannot afford to pay them. What do you think will happened to her workers who are now unemployed?

Great Depression When the stock market crashed and businesses closed, many people were unemployed and did not have any money or anyway to make money. This period was known as the Great Depression. The Great Depression was a time of high unemployment, and desperation for many families.

Factories Close What do you notice about this factory?

Unemployed Workers Many of the workers that lost their job after the Stock Market crashed searched everywhere to find jobs. However, unemployed workers had a really hard time finding work. Why did the unemployed workers have a really hard time finding work during the Great Depression?

People Unemployed

Job Hunt - No Use! People had a hard time find jobs because a lot of businesses either had to close, or were not hiring new workers! If a person does not have a job, what happens to that person and their family?

Black Tuesday October 29 th, 1929 Stocks plunge again Value of market falls People sell what’s left to get some $ By the end of Oct. – over $30 billion has been lost Thousands lose everything

Immediate Effects of the Crash Many lost life savings in the market crash Banks and Brokers call in loans – American people have no $ Hundreds of banks close No $ to pay back loans = empty savings accounts Banks not prepared for people to withdrawal $ at the same time No bank insurance 9 million savings accounts vanish

Charities and Soup Kitchens Many charities saw that people were not only struggling to find a place to live, but also struggling to buy clothes and food. Charities set up Soup Kitchen, or a free place for people to get food and clothing. The Soup Kitchen had really long lines. These lines were called Bread Lines. Why do you think the lines were really long at the Soup Kitchens?

Soup Kitchen and a Bread Line