1. Warm-ups During the 1920’s, many investors borrowed money from banks in order to speculate in the stock market. This practice was often a bad idea for the banks, the investors, and the companies who sold the stocks. Come up with a scenario in which an investor could get in financial trouble after borrowing money from a bank and betting it on one stock.

2. Warm-ups Define the following; –Speculation –Buying on margin –Consumer economy Test on 1920’s Block Day

3. Warm-ups Match the following; –Scopes trial A. Chicago gangster –flapper B. Suppliers of alcohol –bootleggers C. type of young woman –Al Capone D. teaching of evolution –Test on 1920’s Block Day

4. The End of the 1920’s Factors leading to the Stock Market Crash of 1929

5. Economy Appears Healthy 1925 – Market value of all stocks = $27 bil. 1928 – Market value of all stocks = $38 bil. 1929 – Market value of all stocks = $87 bil. People had unusually high confidence in the business world during the 1920’s Welfare Capitalism: new approach to labor relation –A way to prevent strikes and keep productivity high –Offered health plans, paid vacations, rec. programs and English classes for immigrants

6. Economic Danger Signs Rich got richer 71% of the population’s avg. income was less than $2,500 0.1% of the population’s avg. income was more than $100,000 80% of the population had no savings  PROBLEM: Most people are in debt “up to their eyeballs” b/c of the availability of credit  They honestly believed that they could count on future income to cover their debt.

7. Playing the Stock Market “ Get rich quick” attitude Rise in stock market prices led to widespread speculation –Practice of making high risk investments in hopes of getting huge returns Repeat of the Gold Rush –Newspapers reported of ordinary people/small investors making fortunes

8. Warning! Many small investors entered the market, often spending their life savings Buying on the margin –Allowed investors to purchase a stock for only a fraction of its price (10-50%) and borrow the rest –  Broker charged high interest rates and could demand the money at any time – If the stock went up, they could “sell high” and pay off interest and loan while making big profits

9. More Problems Too many goods, Too little demand –Many companies were overstocked – held more goods than consumers would buy

10. Signals of Trouble Ahead Uneven wealth Rising debt Stock speculation Overproduction Hardships of farmers and workers