1. The Great Depression

2. How do Banks Make Money?

3. Customers deposit money in a bank
Banks invest that money by making loans
Banks make money on the interest from loans

4. B. SPARK!!! Of the Depression
Cause & Sparks of Depression
B. SPARK!!! Of the Depression
1. Stock Market Crash, Black Thur. Oct. 29, 1929
a. Summer 1929, Investors began to sell stocks
b. Supply & Demand Again – Massive Sell-Off and prices began to fall
2. Margin (Borrowing $$)
- Buy stock by just paying a small portion of what the stock is worth
(example: 100 shares at $10= $1000 only pay $300 still owe $700)
-Problem, stock crashes and you loose your money and can’t payback stock broker
- stock broker can’t pay back bank

6. People bought stocks on margin
The Stock Market
People bought stocks on margin
a stock is $100 you could pay $10 now and the rest later when the stock rose
Stocks Fell
The person had less than $100 and no money to pay back

7. Then…. People panicked about their money
Investors tried to sell their stocks
This led to a huge decline in stock value
Stocks were worthless
People who bought on “margins” could not pay
Investors were average people that were broke
Then….

8. And….
Bank Failures

9. = + Banks Close Banks have no money to give people
People Default on Loans
People Loose savings

10. Causes of the Great Depression
Stock Market Crash of 1929 – Stockholders lost over $40 billion dollars in 1st two months
Bank Failures – Over 9,000 banks failed.
Reduction in Purchasing Across the Board – Led to unemployment rate above 25%
American Economic Policy with Europe – Smoot Hawley Tariff led to high taxes on imports

11. Causes of the Great Depression
Rising debt led to restrictions on new loans, which led to scarce credit – Federal Reserve tightened the money supply
Big banks had made huge loans to foreign countries - When money supply grew tight, foreign countries defaulted
Drought Conditions – The “Dust Bowl” on the Great Plains led to farm failures
Over Production – Farms & Factories produced a surplus of products