Buying on Margin (BOM) - borrowing money from a broker to purchase stock Installment Plans (IP)– payoff with equal payments over a period of time Stock Market Crash - sudden dramatic decline of stock prices resulting in a significant loss of paper wealth Calling the Loan – full repayment of loans

US: From Boom to Bust

1920's - US had an artificial boom

US Companies continue producing goods at wartime levels Expect good trade to continue

Farmers supply food for US military and people of Europe

Consumers Buy goods on installment plans By end of decade - buying power decreasing

Stock Market

Many Americans buy stock in businesses

Often bought on credit on margin RISKY - relied on further business growth

Increase in buying on margin led to increase in stock values Promise of quick and easy money lured more investors

Surplus increases rapidly Investors sell stocks Stock prices decrease

Creditors demand payment for stock on margin People can't make them

Investors sell off stock - withdraw money from bank to cover costs

10/29/1929 - Black Tuesday Stock market crashes

Aftermath

Stock market losses/decrease in consumer demand leads to workers being laid off Leads to more surplus

Layoffs increase/sales decrease People go to banks to withdraw all of their money

Problem Banks loaned most of the money Money in bank was not protected

As people lose savings - banks start calling loans

Results in people losing homes Unemployment and homelessness increase Banks and businesses close