Stock Market Crash Mr. Williams

What was life like for many Americans during the 1920s? How did they achieve this lifestyle?

Prosperity of the 1920s Gross National Product (GNP) Total value of goods and services produced in a nation during a specific period Rose by 30% during the 1920s

Income Disparity Highest paid 5% of workers received 70% of country’s income in 1929 Remaining 95% combined received only 30%

Stock Market Stock is ownership in a company and it is sold in numbers of shares Buy share: own piece of a corporation Value depends on how well the corporation is doing

Overall value of the stock market increased nearly 400% during the 1920s Many Americans invested (put money into stocks, land, etc.) in the hopes that this would lead to more money for them

Number of shares being traded rose from 318 million in 1920 to 1 billion in 1929 “If a man saves $15 a week and invests in good common stocks…at the end of 20 years he will have at least $80,000…$400 a month. He will be rich.” -John J. Raskob 1929

Credit and Market Buying on margin Borrow $ from a stockbroker to cover the difference paid for a share on the market Example: share cost $1,000 but investor only pays $500 now and the rest when the stock was sold

Black Tuesday October 29,1929 Investors sold more than 16 million shares as a result of others selling and prices falling In October stocks dropped in value by $16 billion

What led to the Stock Market Crashing? Why could the attitudes of the 20s be responsible for this?

Financial Causes of the Crash Stock markets rise in 20s Speculation in stock increases Margin buying encouraged by Federal Reserve policies Stock prices rise to unrealistic levels

Effects on Banks Peopled rushed to banks to withdraw their money Some banks had invested this money on stock market More than 5,000 banks went out of business

Federal Reserve System Nation’s central bank Takes actions and sets policies to regulate nation’s money supply to promote healthy economic activity Enforced policies to make it harder for brokers to give out credit

Effects on Business Banks unwilling to lend businesses money Consumers cut back on their spending Companies had to lay off workers and these unemployed workers had no $

Effects Overseas American banks called in loans NO $ or demand for their product, foreign countries also laid off workers Also, governments from many countries passed high tariffs

Effect on Farming Widespread joblessness and poverty reduced American’s ability to buy food Farmers produced more food than they sold and prices went down: 1933 prices half of what they were in 1929

As incomes dropped, many farmers were unable to make payments on their loans Foreclosure: When a bank or other lender takes over ownership of a property from an owner who has failed to make loan payments

Dust Bowl 1931 a drought occurred in the Great plains Period of below-average rainfall which lasted years This coupled with severe dust storms destroyed crops

By end of 1930s about 2.5 million people left Great Plains Many headed west along Route 66 to California to look for work on farms and orchards Okies-migrants who went to California

Hobos and Hoovervilles Communities of sprawling neighborhoods of shacks sprang up on the outskirts of towns or in public parks Hoboes hopped trains to travel from town to town looking for work