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

4. 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. The Stock Market People bought stocks on margin If 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

8. Bank Failures And….

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

10. Causes of the Great Depression 1. Stock Market Crash of 1929 – Stockholders lost over $40 billion dollars in 1 st two months 2. Bank Failures – Over 9,000 banks failed. 3. Reduction in Purchasing Across the Board – Led to unemployment rate above 25% 4. American Economic Policy with Europe – Smoot Hawley Tariff led to high taxes on imports 5. Rising debt led to restrictions on new loans, which led to scarce credit – Federal Reserve tightened the money supply 6. Big banks had made huge loans to foreign countries – When money supply grew tight, foreign countries defaulted 7. Drought Conditions – The “Dust Bowl” on the Great Plains led to farm failures 8. Over Production– Farms & Factories produced a surplus of products