Vocab List 20 -Stock Market -Bull Market -Speculation -Margin -Margin Call -Bank Run -Installment

The Great Depression Causes & Correlations

I. Background A) Remember the Roaring Twenties Large scale consumption of consumer products Everyone has vacuum, washing machine, etc Fueled by CREDIT B) Credit is unsustainable if there is economic uncertainty. Credit = (ex) Buy a car, pay back what you owe in installments + interest Economic uncertainty = not being sure that the economy will continue to prosper. Why? If economy falls then banks have nothing to loan.

I. Background (cont..) C) Farm prices drop post WW1 Demand for food declines → overproduction → prices fall → farms foreclose. We saw this post Civil War D) 1925 - Car manufacturing & residential construction slows down. E) *** Bullish Stock Market *** → 10% of americans owned stocks, hoping to make fast $$$.

II. What is the Great Depression? A sad mix of: A) Massive Unemployment - 25% unemployed B) $30,000,000,000 lost in Stock Market Crash of 1929 C) Banks closing with all your savings in it gone D) ***Top 5% Americans earned 30% of nations income (66% lived on $2,500 per year)*** INEQUALITY = ROOT CAUSE E) Thousands left rural america to cities, to join thousand others in bread lines

III. How the Stock Market Crashed: A) Margin Buying - when banks/corporations buy stock with borrowed money. Bull market ends in 1929 Everyone sells stocks Prices decline further Two tailspins: Black Thursday - 10/24 Black Tuesday - 10/29 B) Banks lose Billions → banks start closing as people take out all their $$$ (Dont want to be last!!) → 1 in 4 banks closed by 1932.

Market Crash Video

IV. How the Economy Tanked: → 1929 Stock Market Crashes → 1 of 4 Banks will fail → Depositors demand $$$ back, so banks call in loans → Credit Freezes up → Less $$$ in circulation (deflation) → Prices of products go down → To cut costs, businesses lay off workers → Workers cant buy anything → Inventory builds up → Banks not lending $$$ so businesses can’t get loan to pay remaining workers → Many businesses go bankrupt → More workers now cant buy goods/services to keep businesses open.

V. Other Important Factors A) World Economy Also tanked Remember ToV → Germany owes France/GB $33B Germany had to borrow from USA GB/France owe USA $10B in war debt GB/France planned to pay with German reparation BUT when Credit Freezes → Cant loan to Germany → Cant pay GB/France → Cant pay us back B) → Few folks abroad could buy American Goods. World Economy comes to halt.