1. Economic Downfall Worsens

2. Journal # 104
What kind of ripple effects did the Great Crash have on the United States and the World?

3. In the beginning… At first those effected by the crash were investors.
Later, began to hurt people who never owned stock.

4. Ripple Effects
Risky loans: banks lent $$ to high risk firms. They couldn’t repay after the crash
Bank runs: people began to withdraw their money from banks – feared the banks would run out of money.
To fill the withdraws, banks called on borrowers to repay loans; couldn’t repay loans;

5. Ripple effects… Bank failure: bank runs + unpaid loans = closed banks.
Nearly 5500 closed w/in a few years.
Cut in production: businesses couldn’t borrow to make goods; little motivation to make goods – nobody buying

6. Last slide of ripple effects…
Rise in unemployment: cut backs on production caused people to lose jobs.
More production costs: as unemployment grew, incomes shrank; people spent less; output dropped.

7. Economy Contracts
Contraction: economic decline marked by falling output of goods & services.
Depression = long contraction
The Great Depression: lasted when the US entered WWII

8. Workers and Farmers 1931 – Ford shut down Detroit plant
Factories closed small businesses closed restaurants closed 
Farm prices tumbled: wheat sold for $1.18 a lb. in 1929  1932 sold for .49
1932: 12 million were unemployed

9. The GNP
Gross National Product - $103 billion in 1929 to $56 billion in 1932.

10. Impact on the World
Latin America depended on US for goods; Europe depended on investments and goods from US.
US couldn’t loan $$ to Germany for reparation payments.
German banks failed, suspended reparation payments  stopped paying them and then France and GB stopped paying off loans to US.

11. Three Major Causes of the Depression
Unstable economy
Overspeculation: stock market boomed on borrowed $$ and optimism, not value
Government policies: after crash, Federal Reserve limited the $$ supply to discourage lending.
too little $$ in circulation to help economy recover after crash.

12. Depression goes on… Many thought the Depression would end.
People at all levels of society felt the pain
White collar workers laid off.
People couldn’t understand how the banks didn’t have their money.