The Great Depression How could this happen?

I can see clearly now the stock has collapsed! The Great Crash was hard to for see because before this fateful day in October everything was going great Dow Jones Industrial Average which is an average of stock prices of major industries had been climbing to all time highs

They days before On Thursday, October 24 th, known as Black Thursday stock prices fell slowly Brokers called in their loans but others lent more The day before the Dow Jones dropped 21 points in an hour Oct. 24 th there was a 3 billion dollar paper loss

Black Tuesday Also known as the Great Crash Brokers had pooled their money to buy stock but only lasted for a few days On October 29 th, Black Tuesday 16.4 million shares of stock were sold The Great Crash, the collapse of the stock market (overall loss= 30 billion dollars)

The trickle down effects The first people to feel the effects of the Crash were those heavily involved and invested It wouldn’t take long however for it to ripple through the economy and hurt people with no involvement in the stock market

How Could This Happen? 1. Risky loans hurt banks- banks earn interest on the money they lend and they loaned huge sums of money. When stocks fell businesses were unable to pay up 2. Consumer Borrowing- banks lent consumers a lot of money and they could not pay it back

3. Bank runs- people feared the collapse of banks so they all rushed to take out their money and banks could not keep up 4. Bank failures- unpaid loans and bank runs forced banks to close (over 1,000) 5. Savings wiped out- bank failures wiped out what little money people had saved

6. Cuts in production- few people had money to buy and businesses could not get loans, many people lost their jobs 7. Rise in unemployment- businesses had to lay off many people No eight

The Depression The most severe (so far we hope) economic downturn in the nation’s history Lasted from 1929 to WW II in 1941

Impact on Farmers and workers With little money, no ability for loans or incentives many factories closed Thousands of people lost their jobs 75,000 just in auto industry in Detroit Farm prices fell from an already low (wheat went from 1.18 to.49 a bushel) By million people lost their jobs

Impact on world economy? Latin America depended on US markets Europeans depended on US banking The worldwide economy started to crumble

Underlying Causes of the Depression 1. unstable economy- (sound familiar?) the economy of the 1920’s lacked a firm base Wealth was unevenly distributed and based on money that was not there 2. Over speculation- stocks were bought with borrowed money, the stock market boom was based on borrowed money, oops!

3. Government policies- Federal Reserve cut interest rates to spur economic growth but limited money supply Not enough money in circulation and too little too late! on/photoessay.htmhttp:// on/photoessay.htm