Transcript Crash & Depression

The Economy of the 1920’s and
the Stock Market Crash
 What are the economic indicators used
today to determine whether the economy
is weak or strong? What do they tell us?
 Businesses making profits, Dow Jones
(Stock Market), wages, changing of
interest rates, buying/construction of
new homes, sales, poverty &
unemployment levels, GDP, GNP

http://money.cnn.com/news/economy/index.html
 1920s – Stock Market came to symbolize
American prosperity
 Stock Market – rose steady after
1921
 Surged in 1928/1929 – average
price of stock rose 40%
 Hit its peak in September 1929
 Real Wages – what money
could actually buy had increased
by 40%
 Unemployment – low – below
4/5%
The
economy
was
strong
in
the 1920’s,
"We
in
America
today
are
nearer
to the
 Welfare
Capitalism
–
policy
of
meeting
workers’
right?
Or
was it?over
Howpoverty
could there
have
final
triumph
than
ever
needs
with
increased
pay
and
benefits
for
the
purpose
been
a depression
afterofthis
of
before
in the
history
anytime
land.”
of preventing
union
organizations
prosperity?
 Paid supposed
vacations, wageeconomic
increases, health
plans, English classes
~ Herbert
 Leaders in Business
andHoover
Politics (1928)
– telling
Name another
time
in history
where this
American
public that
economy
would continue
to be
has happened.
strong, people believed
them
 Business cycle – there was a
history of and will be
recessions and panics after
periods of prosperity
 Overproduction – companies had expanded
too quickly
 Agriculture – doing poorly – never recovered from
crash of 1920-21
 Bought machinery & equipment during WWI
 Prices down – overproduction & surpluses
 Businesess – increased faster than people had
money to buy it
 Automobile industry – slumped after 1925
 Textile industry – too many goods, not enough demand
 Mining & Lumber – expanded during WWI, too much for
peacetime
 Coal – overexpansion, bitter labor struggles, competition
w/ new energy sources
 Housing Construction – down by 25% between 1928
& 1929
 Unequal Distribution of Wealth –
 Many just getting by – 71% less than $2,500 – 80% with
no savings
 What effects might this have?
 (Once G.D. hits, no $ to spend to revive economy & no $ to
survive)
 Many workers – low wages, long hours, not great
workings conditions despite improvements
 Easy Credit – People borrowed to buy new
products, lived beyond their means
 Installment Buying – people bought products on credit
and paid over time in installments
 Credit
 How do you get it? How does it increase the overall cost of
the item? What are the consequences for those that can’t
pay for their purchases on credit ?
 Stock Market – on rise, but was it real?
 Speculators – taking chances in the stock market
or real estate – trying to make $ quickly
 Many people put life savings in because it looked
like such a great opportunity
 Buy on margin – practice of buying stocks by
paying 10-50% of the full price and borrowing the
rest – banks made loans despite warnings
 Black Thursday
 October 24, 1929
 Stock prices dropped, some worried,
investors and leaders told people
things would be ok
 Bankers pooled money and put
million dollars worth of stock back
into market – helped for a few days
 Black Tuesday
 October 29, 1929
 The bottom drops out 16.4 million
shares sold, prices plunged
 Collapse continued – Dow Jones
(Sept – 381 to Nov – 198.7)
 Market doesn’t hit bottom until 1932
 $14 Billion lost in one day