The Great Depression:

The Great Depression:
I. The Stock Market Crash
A. The Bull Market
1. What is a Bull Market
– When stock prices are generally rising
1920s Bull Market
– In the 1920’s, high worker productivity
+ high consumer demand = high
business profits
– Stock prices rose rapidly from
1928-1929
– 1928 - Radio Corporation of America
went from $85 to $420 per share
2. Buying on Margin
- To take advantage of this market people bought stocks on margin
- purchased stocks on credit then sold them at a higher price
- paid off the loan then kept the profits
- only worked if stock prices rose
3. Warnings of a Bear Market
- Bear Market is when stock prices generally
fall
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In 1929 an economist warned:
▪ -”sooner or later a crash is coming…
Factories will shut down…men will be
thrown out of work…and the result will
be a serious business depression.
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B. The Great Crash
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1. First Signs of Trouble
- Stock market reached a high point on September 1929
- October 23: the market drops sharply
- October 24: thousands of investors try to sell their stocks
- By noon the market had lost $9 billion in value
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2. Market Collapses
– October 29: Black Tuesday
– The stock market collapsed
– In one day the market lost a full
years profits
– Value of all stocks went from:
$87 billion in September to
$56 billion in November
II. The Economy Collapses
A. The Banking Crisis
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1. Investments hurt Banks
- Banks invested heavily in the stock market
- Lost lots of money when the market collapsed
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2. Unpaid Loans
- Banks encouraged customers to take out loans to buy stocks
- Because of the collapse people could not pay back their
loans
3. Bank Closings
– People cant pay back loans
– Banks Close
– Closures caused a panic
– Americans rushed to take their money out of banks
– More Banks run out of money and close
– 1931: 2,294 banks closed, costing customers $1.7 billion
B. Business Failures
1. Bank Closures Hurt Business
• Businesses also lost their corporate credit and bank accounts
• With no money to operate many businesses failed
• Others canceled plans to build new products, cutback on
production, or reduced labor.
2. Unemployment Hurts Business
– Goes from 500,000 to 4 million unemployed
– Without paychecks people cant buy goods or services
– Businesses had to close ther doors b/c people were not buying
products.
– 1930: 26,000 businesses fail, 1931: 28,000 more fail
C. What Caused the Crash
1. Over Production
– The 1920s were years of high productivity
– Between 1919 and 1929 productivity rose 43%
– By the late 1920s markets stopped expanding
– People who could afford cars, appliances, and radios
already had them
– Consumers weren't buying them
2. Distribution of Wealth
– Wealth was unequally distributed in the US
– 1929: 5% of people earned 1/3 of all income 40% of people
earned 1/8 of all income
– Most Americans did not earn enough money to buy many products
– Businesses left with large surplus
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3. Global Trade Problems
– Europeans were still recovering from WWI
– They could not afford many US goods
III. The Bonus Army
A. Army Bonuses
– In 1924, Congress voted to give bonuses to WWI
veterans.
–
$1.25 for each day served overseas and $1.00 for
each day served in the States
– Payment would not be made until 1945
B. Veterans Protest
– May 1932: Unemployed WWI Veterans travel to DC to
protest
– Demanded payment of their bonuses
– 15,000 veterans set up camp in DC and lived there.
C. Removing the Bonus Army
- President Hoover saw them as a
mob
- He order federal troops to
remove them
- They did so using bayonets and tear gas
- After the Bonus Army was removed the troops burnt
down the camp
- President Hoover was heavily criticized for these
actions