The Stock Market Crash Ch 15, Section 1

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Presentation transcript:

The Stock Market Crash Ch 15, Section 1

Causes of the Depression Speculation Consumer Credit Overproduction Uneven Distribution of wealth Struggling Farmers

After hitting all time highs… Most Americans felt the prosperity of the 1920’s would continue The market begins to cool in September 1929. Wealthy investors buy large amounts of stock to stabilize the market. This tactic works…for a while.

October 1929 Thursday the 24th Significant drop in the market causes alarm in the country!

BLACK TUESDAY 10/29/29 The “Bubble bursts” The market plummets and people rush to sell! SELL!! SELL!! (their stock) Loses $30 billion in value

Effects of the crash Risky loans hurt banks. Buying on margin failed, so people couldn’t pay back their loans

Bank Runs People are scared banks may fail, so they rush to withdraw their funds

Banks Fail Bank runs and unpaid loans cause banks to fail In the first few years of the depression, 6000 banks fail

As Banks Fail… They can’t loan money to businesses, which causes cuts in production, which causes…

Rise in unemployment As production in factories falls, people get laid off to make up for the lack of sales. As unemployment rises, consumer spending falls, which causes…

Further Cuts in production… Which causes unemployment to rise… Which decreases consumer spending… Which causes more cuts in production…

Who does this affect? Americans who never invested in the Stock Market were dramatically affected by the Crash Low Wage laborers were hit the hardest Depression Era survivors would avoid buying on credit for the rest of their lives.

World Wide effects… Our economic collapse led to a WORLD WIDE economic collapse. Europe – As US market collapses, investment in Europe falls off… Which causes unemployment to rise… Which decreases consumer spending… Which causes more cuts in production… Germany – When US investments stop, the German economy falters and Germany can no longer make reparation payments.