1. Events and Ideas #2 The Crash
US History
Unit 4

2. Essential Question: Explain the immediate causes and effects of the:
Stock market crash
Banks closing
People losing their savings

3. Stock Market Crash
Later half of 1929, stock market starts to run out of new investors.
Professional investors start to sell off stocks.
Prices start to dip causing panic selling
Stocks are dumped.
By 1933, the country's GNP had fallen to barely half its 1929 level. Industrial production fell by more than half, and construction of new industrial plants fell by more than 90%. Production of automobiles dropped by two-thirds; steel plants operated at 12% of capacity.13 During Herbert Hoover's presidency, more than 13 million Americans lost their jobs. Of those, 62% found themselves out of work for longer than a year; 44% longer than two years; 24% longer than three years; and 11% longer than four years. Unemployment peaked at a staggering 24.1% in 1933, and never dropped below 14.3% until World War II. (By contrast, the unemployment rate has never surpassed 9.7% since.) The financial meltdown initiated by Wall Street's Great Crash of 1929 caused billions of dollars in assets to vanish into thin air. Wealthy Americans—who owned almost all the nation's stocks at the time—were walloped by an 80% decline in the value of the stock market. Even more troubling to the entire population were rampant bank failures—between 1929 and 1933, two out of every five banks in America collapsed, causing more than $7 billion of their customers' hard-earned money to evaporate.16

4. October 24th, 1929 (Black Thursday)
Stocks fall drastically
Brokers panic
General Electric stock falls from $400 a share to $283 a share
Brokers make margin calls – no one can pay

5. Black Tuesday

6. Black Tuesday October 29th, 1929 Stocks plunge again
Value of market falls
People sell what’s left to get some money
October 29th, 1929, $10 to $15 billion in stock value is lost. (15,000,000,000)
By November, $30 billion has been lost
Thousands lose everything

7. The Stock Market Crash
On “Black Tuesday” Oct 29th, 1929, the Stock Market in NYC crashed.
The initial crash actually occurred on “Black Thursday” Oct 24th, 1929.
By mid-November stock prices have dropped by a third.
$30 billion was lost – a sum equal to all wages of Americans earned in a entire year.
The stock market is not the only reason the Great Depression occurred but it undermined the economy to a great extent.

8. People outside New York Stock Exchange on Black Tuesday

10. Banks
Because banks had loaned money to stock speculators, and then invested depositor’s money in the stock market…
…when margin called came due and all of the loans were called in, there wasn’t enough money to pay off all of the loans.

11. Banks Closed People got scared started to pull their money from banks.
The banks ran out of money…
People standing outside a bank, waiting for it to open, so they can take all of their money out of it.

12. Immediate Effects of the Crash
Many lost life savings in the stock market crash
Banks and brokers call in loans – American people don’t have money to pay back loans or margin
Banks are not prepared for people to withdrawal money at the same time
No bank insurance
What were two ways people lost money at the end of 1929?

13. Hundreds of Banks Close
People line up outside a bank hoping to get their money out
Customers that were more responsible and did not buy on margin or credit lost their savings that were in the bank when banks closed.
9 million savings accounts vanish

14. In early 1930, there were 60 bank failures per month.
Eventually, 9,000 banks closed their doors between 1930 and 1933.
Each time a bank failed, a large amount of money disappears from the economy

15. Add to your list… Causes of the Great Depression:
7. Stock market crashes 8. Banks close 9. People lose their savings

16. The Great Depression Begins

17. U.S. Economy
In the first four years of the Depression, the GDP (Gross Domestic Product) fell by 30% from to 1933.
The U.S. Stock Market lost 90% of its value.

18. Many did not realize how severe the downturn was until 1932, when the economy had technically “hit bottom.”

19. Businesses Many companies stocks lose value, thus losing money
Businesses are no longer have money to run the company
Many people are laid off
Many companies go bankrupt and have to close their doors.

20. Unemployment Skyrockets
12 million people are out of work
Tattered communities of the homeless coalesced in and around every major city in the country.
New York City. December 1937.
Photographer: Russell Lee.
Unemployed workers in front of a shack with Christmas tree in NYC

22. Add to your list… Causes of the Great Depression:
People lose their jobs –
Unemployment in the U.S.
raises to 25% by 1933

23. Hoovervilles People lose jobs
Homes and property seized due to non-payment of loans
Shantytown start to appear across the American landscape.
Blaming the president, people referred to them as Hoovervilles.
1933: 9,000 banks had failed, 12 million people were out of work.
i. 25% of the workforce was out of work.
People lose jobs and homes, shantytown start to appear across the American landscape.
i. Average family income dropped from $2,300 to $1,600 a year. Families found that they could no longer afford housing. Sometimes people would refuse to move once they became so poor that they could not afford housing. Landlords had local bailiffs issue eviction notices for tenants – their belonging would be piled on the street. People starting setting up shacks on unused or public lands (they were called shantytowns).
Blaming the president, people referred to them as Hoovervilles.
“Hobos” wander the countryside.
i. In search of work or a better life, many homeless and unemployed Americans began to wander around the country. Walking, hitchhiking or “riding the rails” – they would sneak pass police and hop on open box cars to ride a train. Hundreds of thousands of people – mostly young men and boys – wandered from place to place eating and working where they could. “Of Mice and Men” by John Steinbeck is published in 1937 and chronicles the story of George and Lennie as they wander the California landscape and dream of better times.

24. Hobos - Hunger “Hobos” wander the countryside.
People stand in breadlines…and soup kitchens
A lack of faith in your own ability to feed yourself or your family.

25. Essential Question: Explain the immediate causes and effects of the:
Stock market crash
Banks closing
People losing their savings