1. BACKGROUND FOR WHAT HAPPENED IN 1929 1920’s Time Of Tremendous Prosperity Increased Industrialization And New Technologies Automobile Led The Way With Industrial Expansion

2. Stock Market Soared During The 1920’s From 1921 to 1929, Dow Jones Average Went From 60 to 400 --- 567% Called a Bull Market –Investors Purchased Stock “On Margin” –Included Banks And Private Investors

3. Before The Crash

4. Buying On Margin Buying Stock On Credit Against Future Profits I gladly pay you tomorrow for a hamburger today..

5. Example Of Buying On Margin Bob Buys Stock In Ford Motor Company At $1 Per Share Buys 100 Shares Total Cost $100 (1 X 100) With Stock Going Up 567%, Broker Tells Bob, “Don’t Worry About Paying Me Right Now, You Pay Me Later When The Stock Goes Up” Stock Goes Up To $5 Per Share Total Value Of Stock Is Now $500 ($5 X 1) Will Take $100 Bob Owes Broker Out Of The $500 Leaving Him With $400

6. HOW THE BANKING SYSTEM WORKS? When You Deposit Money Into The Bank, Does The Bank Keep It There? No—Only Way They Make Money Is To Lend It Out Or Invest It.

7. How The Banking System Works? Bob Deposits $100 In The Bank The Bank Pays Bob 3% Interest On His Deposit Bank Then Takes Bob’s $100 And Either –Lends It To Sue And Charges Sue 7% On The Loan (Makes 4% Profit) OR –Takes Bob’s $100 And Invests It Will Buy $100 Worth Of Stock In Ford And Make A Total Of $400 ($500 - $100 they owe Bob) Will Make Actually 1334% On Bob’s Money $400 Less The $3 They Are To Pay Him Back

8. WHAT BASIC PREMISE IS THIS SITUATION BASED UPON? THAT STOCKS KEEP GOING UP AND UP AND UP!

9. Entire System Based On Credit Is Like Building A House On Quicksand. It May Initially Stand, But With One Small Bit Of Wind It Will Collapse or The Story Of The Three Little Pigs

10. STOCK MARKET CRASHES! CAUSES PEOPLE SELLING THEIR STOCKS INCREASE IN INTEREST RATES

11. PEOPLE SELLING THEIR STOCKS Stock Prices Continue To Rise Cannot Cash In On Increase Unless You Sell Stock What Happens To Price When Everyone Wants To Sell? Price Goes Down!

12. INCREASE IN INTEREST RATES Relationship Between Interest Rates And Stock Prices Is Inverse As Rates Go Up, Stock Prices Go Down; As Interest Rates Go Down, Stock Prices Go Up –People Begin To Sell Stocks To Invest In Other Instruments That Now Have A Higher Interest Rate –When One Sells, Becomes A Buyer’s Market –Prices Decline Called A Bear Market By 1929, Federal Reserve Raises Interest Rates In Order To Curb Inflation

13. STOCKS BEGIN TO FALL: On Thursday, October 24, 1929, Market Begins Major Drop On Monday, October 28, 1929, Market Dropped 13% Tuesday, October 29, 1929 Market Dropped Another 12%

14. SUNMONTUESWEDTHURSFRISAT 1 ST 2 ND 3 RD 4 TH 5 TH 6TH7TH8TH9TH10TH 11 TH 12 TH 13TH14TH15TH16TH17TH 18 TH 19 TH 20 TH 21 ST 22 ND 23 RD 24 TH 25 TH 26 TH 27 TH 28 TH 29 TH 30 TH 31 ST October 1929

15. BLACK TUESDAY

16. Black Tuesday Usually Denotes The End Of The Roaring 20’s And The Beginning Of The Great Depression

17. STOCKS CONTINUES TO FALL During September And October, Market Dropped Over 40% In Value By End Of November, Market Lost $100 Billion Market Continued To Drop Until July 1932 When It Was At 41.22 Down 89.2%

18. Would Take 22 Years For Market To Recover 1954

19. SO HOW DOES THIS IMPACT THE ENTIRE ECONOMY AND HOW WOULD THIS LEAD TO A DEPRESSION?

20. Bob’s Ford Stock Instead Of Going Up, Goes Down To.50 Per Share

21. SO HOW DOES THIS IMPACT THE ENTIRE ECONOMY AND HOW WOULD THIS LEAD TO A DEPRESSION? His $100 Investment Is Now Only Worth $50; But He Still Owes His Stockbroker The $100

22. SO HOW DOES THIS IMPACT THE ENTIRE ECONOMY AND HOW WOULD THIS LEAD TO A DEPRESSION? With Drop In Stock Prices, Bob’s Stockbroker Realizes He Will Not Have Money From Any Profits To Pay Him Back The $100 And Calls Him On The Phone To Ask Him To Send Him The Money He Owes Him.

23. SO HOW DOES THIS IMPACT THE ENTIRE ECONOMY AND HOW WOULD THIS LEAD TO A DEPRESSION? Bob Was Smart And Had That $100 In The Bank, “Just In Case”

24. SO HOW DOES THIS IMPACT THE ENTIRE ECONOMY AND HOW WOULD THIS LEAD TO A DEPRESSION? So, Bob Goes To The Bank To Withdraw His $100 But What Did Bob’s Bank Do With His $100?

25. SO HOW DOES THIS IMPACT THE ENTIRE ECONOMY AND HOW WOULD THIS LEAD TO A DEPRESSION? Bob’s Bank Had Taken His $100 An Invested It In Ford Stock As Well So, They Do Not Have Bob’s $100 To Give Him What Will Bob Do? What Will Bob’s Bank Do?

26. SO HOW DOES THIS IMPACT THE ENTIRE ECONOMY AND HOW WOULD THIS LEAD TO A DEPRESSION? Bob’s Ford Stock Instead Of Going Up, Goes Down To.50 Per Share His $100 Investment Is Now Only Worth $50; But He Still Owes His Stockbroker The $100 With Drop In Stock Prices, Bob’s Stockbroker Realizes He Will Not Have Money From Any Profits To Pay Him Back The $100 And Calls Him On The Phone To Ask Him To Send Him The Money He Owes Him. Bob Was Smart And Had That $100 In The Bank, “Just In Case” So, Bob Goes To The Bank To Withdraw His $100 But What Did Bob’s Bank Do With His $100? –Bob’s Bank Had Taken His $100 An Invested It In Ford Stock As Well –So, They Do Not Have Bob’s $100 To Give Him –What Will Bob Do? What Will Bob’s Bank Do? MULTIPLY THIS SCENARIO BY MILLIONS OF PEOPLE

27. What Will Bob Do? What Will Bob’s Bank Do? With All These People Coming To The Bank To Take Their Money Out, And Knowing They Do Not Have The Money To Give Them, The Only Thing The Bank Can Do Is To Close Their Doors And Lock Up The Building.

28. What Will Bob Do? What Will Bob’s Bank Do? Bob And Everyone Else Cannot Get Their Money. It Actually Is Not Even There!

29. What Will Bob Do? What Will Bob’s Bank Do? Can Bob Now Buy That Car And Washing Machine He Was Planning To Buy? NO!

30. What Will Bob Do? What Will Bob’s Bank Do? So What Will The Car Dealership And Appliance Store Have To Do Since People Are No Longer Coming To Buy Their Products?

31. What Will Bob Do? What Will Bob’s Bank Do? Lay Off Some Of Their Workers (Sue, Bill And George)

32. What Will Bob Do? What Will Bob’s Bank Do? Without Work Now, Will Sue, Bill And George Be Able To Take That Vacation And Buy That House They Wanted? NO!

33. What Will Bob Do? What Will Bob’s Bank Do? So What Will The Travel Agents Do And What Will Happen To The Construction Workers? They Will Also Lose Their Jobs!

34. What Will Bob Do? What Will Bob’s Bank Do? With All These People Coming To The Bank To Take Their Money Out, And Knowing They Do Not Have The Money To Give Them, The Only Thing The Bank Can Do Is To Close Their Doors And Lock Up The Building. Bob And Everyone Else Cannot Get Their Money. It Actually Is Not Even There! Can Bob Now Buy That Car And Washing Machine He Was Planning To Buy? No! So What Will The Car Dealership And Appliance Store Have To Do Since People Are No Longer Coming To Buy Their Products? Lay Off Some Of Their Workers (Sue, Bill And George) Without Work Now, Will Sue, Bill And George Be Able To Take That Vacation And Buy That House They Wanted? No! So What Will The Travel Agents Do And What Will Happen To The Construction Workers? They Will Also Lose Their Jobs! SNOWBALL EFFECT

35. CAN THIS HAPPEN AGAIN??

36. Government Action To Prevent This From Happening Again Limit On Margin Buying (40%) Reserve Requirement (Will Vary But Usually Around 10%) FDIC – Insured Deposits