Warm Up # 32 Describe what buying on margin is and why it can be so dangerous.

Economic Collapse and The Great Depression Pg. 7-8

Postwar Economic Boom The “Roaring Twenties” Many believed that the United States was a place of unlimited growth, opportunity, and achievement. Americans were earning more money than ever. Americans had more money to spend on luxury goods. Technological advances increased the number goods produced. The U.S. Stock market was at an all-time high.

However… By late 1929 Unemployment was on the rise. Farmers were losing their land. Stock prices were dropping. The number of Americans living in poverty increased, thus few people could afford the new luxury goods.

Six Factors That Led to The Great Depression Domestic and International Economic Policies Stock Market Speculation The Stock Market Crash and The Banking Industry Collapse Overproduction of Goods The Decline of the Farming Industry Unequal Distribution of Wealth

1. Domestic Economic Policies Trickle-down economics Economic policies that benefited big business and America’s wealthiest citizens would eventually benefit all Americans. Tax Cuts Increased the gap between the rich and the poor.

International Economic Policies After WWI, most European nations were in economic ruin and could not repay the U.S. United States lent the European nations even more money in an attempt to help them repay the original debt. As a result, nations like England, France, and Germany fell deeper and deeper in debt.

2. Stock Market Speculation When a person or organization makes a risky investment in the hope of making a quick, large profit. Investors believed that the stock market would go up indefinitely. Investors bought and sold stocks for inflated prices that had little correlation to the companies’ actual worth. Many investors began buying on margin paying a small percentage of a stock’s price and using the stock as collateral

Black Tuesday October 29, 1929

3. The Stock Market Crash and The Banking Industry Collapse In 1929 many investors began selling their stocks while the prices were still high. As investors began withdrawing from the market, stock prices fell. On October 28 investors sold their stocks at a loss of $4 billion. On October 29 investors lost $16 billion.

3. The Banking Industry Collapse The stock market crash triggered a collapse of the U.S. banking industry. Government did not interfere or regulate banking before the Great Depression. Families lost all their savings. People could not repay mortgages and loans. Even people who had not speculated in the stock market lost all their money.

4. Overproduction Technological advances during WWI. Demand did not keep up with supply and the market was flooded with goods that few Americans could afford to buy. After WWI farmers continued producing large quantities, but lost their European markets—this caused surpluses.

5. The Decline of the Farming Industry During the 20s farmers borrowed heavily from banks to buy new, technologically advanced equipment. When they could not sell their surplus crops they could not repay their loans or mortgages. Banks could not sell farms or equipment (this added to the problem of bank failures). The Dust Bowl swept across the mid- and southwestern United States.

6. Unequal Distribution of Wealth As the 1920s wore on, the gap between the rich and the poor grew wider. In 1929, 1% of the American population possessed over 59% of the country’s wealth. 60% of U.S. families lived on or below the poverty line. Workers were being replaced by machines. Americans fell deeper and deeper in debt as they purchased goods on credit.

John Green – Recap Go up to 7 minutes https://www.youtube.com/watch?v=GCQfMWAikyU

Synthesis Complete the graphic organizer on your handout.