Transcript What were things like during and before the great depression

What were things like during
and before the great depression
During the 1920’s, often called the Roaring Twenties, the U.S. economy had an unprecedented economic boom. Things
such as electricity, radio, telephone and cars were being produced for the masses. There was mass production in the
manufacturing, telecommunications, movie and chemical sectors. Infrastructure was being built to support all of these
new technologies. Much of the population moved into the cities to acquire jobs in these industries. Americans found
themselves with ever increasing amounts of dollars to spend which was then invested in the stock market and deposited
in to banks. With the supply of money growing rapidly, banks were opening up at the rate of 4 – 5 per day.
What Caused The Great Depression?
The Great Depression happened due to a number of reasons. It was created by a combination of a stock market crash,
bad banking structure and tight monetary policy. This is why it lasted so long.
The stock market peaked on September 3, 1929 with a record close of 381.17. Trading volume was 444k shares. By the
end of the same month, the market had fallen by 10% to 343. On Monday, October 29, on 16.4% shares traded, the
markets fell 11.5%. By that time, the markets closed at 230.17 down 40% from its all time high. In that single day,
investors lost 14 billion dollars and by the end of 1929, 40 billion dollars was lost. This crash put a lot of pressure on banks
and caused a great deal of money to be taken out of the economy.
At that time, banks lent money to investors to buy stock. Nearly $4.00 out of every $10.00 that was borrowed from the
banks was used to buy stock. Margin requirements were as low as 10% during the 1920’s. Banks were allowed to
speculate and buy stocks for themselves. Because the capital requirements to start new banks were low, many banks
were created during that time. Once the selling began, more selling was needed to satisfy margin calls and liquidity
requirements for banks. People feared that their bank would collapse since, at that time, there were no guarantees on
cash at the bank. That started a massive run on the banks to pull money out. Some banks were not able to fulfill the
requests for withdrawal and closed their doors to people. Lending for business and consumers was ground to a halt.
More panic followed as people lost their money and banks collapsed. People then rushed to withdraw their money and
this created a domino effect. At that time, paper money was backed by gold. People started putting money under their
mattresses instead of risking putting it in the bank.
2006-2007
• The financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008
financial crisis, is considered by many economists to have been the worst financial
crisis since the Great Depression of the 1930s.[] It threatened the total collapse of
large financial institutions, which was prevented by the bailout of banks by national
governments, but stock markets still dropped worldwide. In many areas, the housing
market also suffered, resulting in evictions, foreclosures and prolonged
unemployment. The crisis played a significant role in the failure of key businesses,
declines in consumer wealth estimated in trillions of U.S. dollars, and a downturn in
economic activity leading to the 2008–2012 global recession and contributing to the
European sovereign-debt crisis The active phase of the crisis, which manifested as a
liquidity crisis, can be dated from August 9, 2007, when BNP Paribas terminated
withdrawals from three hedge funds citing "a complete evaporation of liquidity".
How much do small business help or
economy
• A small business is defined as a business corporation, limited liability
company or proprietorship with 500 employees or less. According to the
U.S. Small Business Administration , small businesses represent 99.7
percent of all employer firms. Since 1995, small businesses have generated
64 percent of new jobs, and paid 44 percent of the total United States
private payroll, according to the SBA.
Is new jersey a business friendly state
• New Jersey moved up one notch, to 49th, but the survey’s authors says it has little to do
with anything the Christie administration has done.
• “The reason that New Jersey has moved up one place to 49th best is actually because
New York dropped,” the survey’s authors Scott Drenkard & Joseph Henchman write.
• New York dropped after Republican lawmakers and Gov. Andrew Cuomo, a Democrat,
struck a deal that overhauled the state's tax rate structure, raising the rates on the
wealthy while giving the middle class a cut.
• The Tax Foundation uses its own formula to compare the different tax rates and other
variables in each state, from the income to property taxes. The conservative organization
was founded in 1937 and receives some funding from corporations.
• Wyoming, South Dakota and Nevada — all western states witnessing population growth
— top the list of the most business friendly states. New York is followed by New Jersey
and then California as the least business friendly climates
Consumer
• The U.S. economy is predominantly driven by consumer spending, which accounts for
approximately 70 percent of all economic growth. But if consumers are to continue to
drive the economy, they must be in a sound financial position; if they become
overburdened with debt, they are not able to maintain their position as the primary
driver of economic growth