Great Depression Learning Focus 3.1

The Great Depression of 29-30’s The Great Depression was worldwide – there was widespread hunger, poverty, and unemployment. 24% of labor force was unemployed. Wages and prices fell substantially. Thousands of businesses were bankrupt. Banks failed. Foreclosures forced farm families off their land.

Stock Market Crash 1929 Stock Market Crash - initiated the Great Depression and economic and social Reforms followed to prevent such a severe economic downturn from occurring again.

Stock Market Crash 1929 Stock Market Crash = Speculation and buying on margin had over-inflated the price of most stocks. When the market lost confidence in the stocks, prices plunged. The Market crashed on October 24, 1929. It was known as “Black Tuesday.”

Causes of the Crash Decline in worldwide trade due to: World War I =everybody was producing goods to fight the war and not to trade. Trade means selling and making money. Not enough of that to go around. European economies lack of ability to purchase goods = Most of Europe was rebuilding and did not have money to spend outside of what they needed in their own countries. Not buying from the U.S.A. Inability to repay war debts and reparations = It was hard for countries to pay off war debt and reparations. Germany couldn’t continue to pay its debt. High tariffs also interfered with free trade between countries = tariffs were placed to protect American goods and other countries goods. This caused products not to be bought and sold.

Causes of Crash Cont. Bank failures - banks made unsound loans; bank failures resulted when the loans could not be repaid; depositors lost all of their savings in the banks Buying on margin - the practice of speculating and buying stocks with only a small fraction of the money needed to pay for these stocks.

Causes of Crash Cont. Overproduction of goods = we made a lot of products after the war was over and people were not buying them because everybody already had one. Insufficient income = consumers lacked sufficient income to purchase goods; farmers’ income fell; workers’ income failed to keep pace with prices; many workers were replaced by machinery.

Key terms to understanding the Great Depression Depression = economic decline. Synonyms: bad times, bankruptcy, bear market, big trouble, bottom out, bust. Recession = reduction of business activity. Synonyms: downturn, hard times, inflation, rainy days,

Troubles on the Horizon Credit = Many Americans bought consumer goods on credit, allowing people to buy goods when they did not actually posses the money. Investment = money that is invested with an expectation of profit.

How you play in the stock market Bull Market – One with an upward trend in stock prices. Bear Market – One with a downward trend in stock prices. Buying on the Margin – Purchasing stocks with borrowed $$$