1. United States History 11 The Great Depression Begins: “The Great Crash”
Unit 3, Chapter 11, Section 1

2. Main Idea
The stock market crash of revealed weaknesses in the American economy and helped trigger a spreading economic crisis

3. The Appearance of Prosperity
between 1922 & 1928 GNP rose 30%
1 in 5 owned an auto in 1929
Unemployment very low between 1923 & 1929: 3%
Stock market expansion: stocks quadrupled from
Faith in business and government: public confidence in government and pro-business policies remained high
The election of 1928: Hoover won an easy victory against Al Smith

5. Economic Weaknesses
Wealth distribution: 1% of the population grew income 60% from
Credit and the stock market: “buying on margin” allowed investors to borrow from stockbrokers
The Federal Reserve: tried to deter margin loans

7. Causes of the 1929 Stock Market Crash
Economic Factors
Financial factors
Stock markets rise in mid-1920s
Speculation in stock increases
Margin buying encouraged by Federal Reserve policies
Stock prices rise to unrealistic levels
Poor distribution of wealth
Many consumers relied on credit
Credit dried up
Consumer spending dropped
Industry struggled

8. The Effects of the Crash
The impact on individuals: huge fortunes disappeared; as stock prices fell borrowed money had to be paid back, shares sold for less than paid
Effects on banks: people rushed to withdraw money, banks had invested in stocks also, could not pay, went bankrupt
Effects on business: struggling businesses could not rely on banks, consumers were not spending
Effects overseas: struggling Europe after WWI was thrown backward; high tariff did more harm than good