Download presentation
Presentation is loading. Please wait.
Published byDenis Morton Modified over 9 years ago
1
CHAPTER 15 SECTION 1 PAGES 442-447
2
Some voices warned of problems within US economy Nations agricultural crisis “Sick” industries Reliance on credit Stock speculation on overheated market Widespread prosperity led most Americans to believe economy would continue to grow
3
By 1929 total number of credit purchases was 6 times higher that 1915 Reached a total of $7 billion Federal government kept interest rates low during 1920s Experts said that easy credit would promote business, but credit load could hurt consumers in a downturn People ignored and continued to buy on credit
4
Investors paid millions into market Bull Market– upward trend in prices Bear Market– downward trend Speculation– buying and selling to make a quick profit Inflated prices– some were selling for more than they were worth Margin buying– purchasing stock with borrowed money As little as 10% of price Once prices fell investors found themselves deep in debt
5
October 24, 1929 “Black Thursday” Large number of shares sold by nervous investors Confidence fell and prices plunged– Panic set in J.P. Morgan and other Bankers bought stocks at end of session to stop plunge
6
OCTOBER 29, 1929 Investors dump more than 16 million shares of stock on market Chain of events Brokers demand cash to payoff loans given to margin buyers Investors sold stock to cover losses Repeat steps 1 and 2, over and over By mid November stocks had lost $30 billion
7
Officials called it temporary and minor Herbert Hoover– “We have now passed the worst and… shall rapidly recover”
8
Only a small percentage had money invested in stock market Banks suffered significant losses Worst crisis came when borrowers defaulted on loans Some banks were forced to close Depositor wanted their savings Between 1930-32– 5,000 banks failed
9
Consumers were unwilling to buy products– especially on credit Businesses forced to trim inventories and scale back production and layoff workers 26,000 business went bankrupt in 1930 28,268 in 1931 1929 Gross National Product was $103 billion by 1933 fell to $56 billion Unemployment reached 23.6% by 1932– 3.2% in 1929
10
Stock Market crash was not sole cause of our depression Global Depression Income gap Consumer debt The business cycle
11
U.S. Depression blamed on state of finances following WWI World trade declined– foreign consumers unable to buy American products Industry stuck w/ large surpluses Smoot-Hawley Tariff of 1930 Highest in U.S. history U.S. tariffs contributed to global depression Eliminated U.S. market for imported goods– accelerating depression
12
Unequal distribution of income Between 1923-29 disposable income of wealthiest 1% of America grew by 63% Meanwhile poorest 93% disposable income decreased by 4%
13
Most people did not have buying power needed to boost economy Some bridged gap by buying on credit Reliance on credit contributed to economic chaos Once depression hit government raised interest rates and consumers could not pay debts
14
Some experts believe depression was inevitable part of business cycle All economies go through ups and downs with free enterprise Length and severity of Great Depression went beyond normal rhythms of business cycle
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.