Tuesday, December 10th The stock market is… Write this on a new sheet in your notebook, and leave space for another prompt. You can write on the back of a page.

The Stock Market Crash! Goals of lesson: 1) What was the Stock Market Crash of 1929? 2) What was a Bull Market? 3) What was speculation? 4) What was buying on margin? Main Idea: - Inflated stock prices, overproduction, high tariffs, and mistakes by Wall Street helped lead to the Great Depression.

The Roaring 20’s  The 1920’s were a time of fun and also a time of economic boom.  People made enough money to buy items previously considered luxury items  People were told that this time of prosperity would not end. This caused thousands of people to put their money into stocks.

The Long Bull Market  The stock market was established as a system for buying and selling shares of companies.  A long period of rising stock prices is known as a bull market.

The Long Bull Market (cont.)  As the bull market continued to go up, many investors bought stocks on margin, making a small cash down payment.  This was considered safe as long as stock prices continued to rise.  If the stock began to fall, the broker could issue a margin call demanding that the investor repay the loan immediately.

The Long Bull Market (cont.)  In the late 1920s, new investors bid prices up without looking at a company’s earnings and profits.  Speculation occurred when investors bet on the market climbing and sold whatever stock they had in an effort to make a quick profit.  By late 1929, a lack of new investors in the stock market caused stock prices to drop and the bull market to end.

The Great Crash (cont.)  As stockbrokers advised their customers of margin calls, customers responded by placing their stocks up for sale, causing the stock market to plummet further.  Business leaders tried to regain public confidence by putting millions of their own money into the market, but the positive effects were short lived.  Stock prices fell drastically on October 29, 1929, Black Tuesday, resulting in a $10 to $15 billion loss in value.

The Great Depression  Goals:  What is a Depression?  What is the Hawley- Smoot Tariff?  What are public works?  What is the RFC?  What was the Emergency Relief Act? Main Goal: Outside of the Great Crash, what other factors led to the Great Depression?

The Great Depression (cont.)  All this helped pave the way for the Great Depression. A Depression is when there is a rise in unemployment.  The stock market crash weakened the nation’s banks.  Because the government did not insure bank deposits, customers lost their money if a bank closed.

The Great Depression (cont.)  Bank runs resulted as many bank customers withdrew their money at the same time, causing the bank to collapse.

So What Else Contributed?  The Farming, textile, lumber, mining, and railroad industries all declined.  Month’s before the crash the automobile industry and construction industry lost business resulting in lower wages and layoffs.  In 1929, the top 5 percent of American households earned 30 percent of the country’s income.

How did the government help cause the depression?  The Hawley-Smoot Tariff intensified the Depression by raising the tax on imports.  Americans purchased less from abroad because of the high cost.  In return, foreign countries raised their tariffs on American products, causing fewer to be sold overseas.

Another way to look at it Causes of the Depression How it affected the Automobile industry

Herbert Hoover  President Herbert Hoover (elected in 1928) was called on by the people to do something to help the struggling economy.  Hoover believed in volunteerism and that state and local governments should work together to solve the crisis.  In May of 1930 President Hoover promised the public that the worst was over.

Oops!  After the pledge failed, Hoover increased public works–government-financed building projects.  Hoover asked the nation’s governors and mayors to increase public works spending.  At the same time, however, Hoover refused to increase government spending or taxes. He feared that deficit spending would actually delay an economic recovery.

Hoover in Action  By 1932 President Hoover couldn’t deny that his methods were not working.  In Feb Hoover asked Congress to set up the Reconstruction Finance Corporation (RFC) to make loans to banks, railroads, and agricultural institutions.  This was supposed to stimulate the economy, therefore creating jobs.

Hoover in Action (Cont.)  The Emergency Relief Act was passed in July 1932 to distribute another $300 million in loans to state and local governments.  The catch to this loan was that to qualify for the loan, the governments had to be on the verge of bankruptcy. By the end of the year the RFC had only given away 50% of its money.

Mounting Protests  In 1924 Congress enacted a $1,000 bonus to be paid to veterans in  In 1931 a bill was introduced in the House that authorized early payment of the bonus.  In 1932 the “Bonus Army” marched to Washington, D.C., to ask Congress to approve the legislation.

Hooverville  The Bonus Army started with 1,000 in May of  By June they had swelled to 17,000.  They set up camp in abandoned buildings and marshy land by the Anacostia River in Washington, D.C.

The Straw that Broke the Camel’s Back  After Hoover refused to meet with the Bonus Army and the Senate voted the new bonus bill down, some of the marchers left.  Some marchers stayed, moving into deserted buildings in Washington, D.C.  President Hoover ordered Army Chief of Staff Douglas MacArthur and his aide Dwight D. Eisenhower to clear out the remainder of the Bonus Army from federal buildings.

Hoover Conclusions  The press and the American public thought that this action was horrific.  Hoover was thought of as cold for his refusal of direct relief, but this made him a vicious bully.  This would not help Hoover in his quest for re-election in 1932 against Democratic nominee Franklin D. Roosevelt.