1. The Stock Market Crash of 1929 and the beginning of the Great Depression

2. Opener Using your homework from last night… 1.What were some signs that the economy of the late 1920s was healthy? 2.What were some economic warning signs that the economy was heading for a major downturn?

3. “Blue Skies” Wages Up 40% Since 1914! Welfare Capitalism –Employers actually compete over employees! Offer paid vacations, health plans, recreational programs, etc. Inflated Stock Prices –1925: Stock Values at $27 Billion –Oct 1929: Stock Values at $87 Billion

4. Warning Signs 1.Uneven Distribution of Wealth Rich get richer.1% of population = 34% of county’s savings 71% of people at or below the poverty level ($2,500 a year). 2.Personal Debt More and more Americans buy items on credit, become in debt. 3.Stock Market Speculation Speculation = attempting to predict stock prices Buying “On Margin” = using credit to buy stocks 4.Over-productivity Factories were producing goods faster than Americans could consume them. New housing starts down 25% in 1928. 5.Trouble for Farmers Because of falling crop prices, many farms go bankrupt

5. Crash An Omen –In Sept., 1929, The Dow Jones stopped its upward climb at 398 points and started to fall. Some shareholders sold Some banks called back loans, others kept lending. “Black Tuesday” –16.4 million shares of stock were sold back to brokers. –By early November, 1929, The Dow Jones was down to 198 points.

6. The Business Cycle Depression

7. Ripple Effects of the Crash Early on, only about 4 million out of the nation’s population of 120 million lost everything due to the crash. Before too long, however, the effects of the crash began to ripple through the nation’s economy… Risky Loans –Banks loaned money to many investors and high risk businesses. As stock prices fell, both were unable to repay their loans. Consumer Borrowing –Consumers had borrowed money during the 1920s to pay for goods through “installment plans.” When banks called in these loans, consumers couldn’t pay for them. Bank Runs –Fearful that banks would run out of money, people rushed to make withdrawals from their accounts. To repay money, banks had to call in loans. Many consumers and businesses could not afford to repay loans. Bank Failures –Combination of bank runs and consumers/businesses unable to repay loans resulted in banks closing their doors. Savings –Because of bank runs, 9 million savings accounts had been wiped out by 1933. Cuts in Production –Businesses could not borrow money to produce more goods. People could not afford goods, so cuts were made in production. Rising Unemployment –As businesses cut back on production, they laid off workers and unemployment grew.

8. Characteristics of the Great Depression Great Depression –Great Crash resulted in largest economic downturn in history. 1929 – 1941 Effect on Urban Workers –Factories began to close. –Small businesses and restaurants feel effects of factory workers being unemployed. By 1932, 25% unemployment! Effect on Farmers –Urban workers unable to afford farm goods. Farm prices fall.

9. Effect on the World By 1930s, international trade had made many countries dependent on USA. –Many countries depend on USA as a market for their goods. –Many countries buy American goods. –Many countries rely on USA as a creditor to offer them loans. US Depression = Global Depression