1. Ripple Effects of the Crash and Depression

2. Stock Market Crash

3. Setting the Scene October 29, 1929 October 29, 1929 CRASH! CRASH!

4. The Market Crashes NOTE: A stock ’ s value SHOULD be based on the company ’ s earnings and assets. NOTE: A stock ’ s value SHOULD be based on the company ’ s earnings and assets. BUT: Demand and speculation can make a stock price go up even more. BUT: Demand and speculation can make a stock price go up even more.  Think of auctions

5. The Market Crashes Leads to OVERVALUED stocks. Leads to OVERVALUED stocks. Then, if you borrowed money to get the stock … Then, if you borrowed money to get the stock … CRASH CRASH

6. People asked “ How did this happen? ” Black Thursday: Black Thursday:  Some banks and brokers began to call in loans after stocks began to fall in value.  People who had bought General Electric at $400 had to sell for $283.  In one day $3,000,000,000 was lost! (worth $482,000,000,000 today!)

7. Black Thursday: October 23, 1929 4 – 8 million shares of stock were sold. 4 – 8 million shares of stock were sold. Reassurances from stock specialists and the President. Reassurances from stock specialists and the President. “ The nation ’ s business is on a sound and prosperous basis. ” “ The nation ’ s business is on a sound and prosperous basis. ”

8. Black Tuesday: October 29, 1929 To stop the panic of Thursday, bankers pooled their money to buy up stocks to make things look stable for Friday and Monday To stop the panic of Thursday, bankers pooled their money to buy up stocks to make things look stable for Friday and Monday

9. October 29, 1929 THAT is what happened to ALL stocks. THAT is what happened to ALL stocks.  Investors lost money  Businesses lost profits  Workers were laid off  Banks who had loaned money failed when people couldn ’ t pay back their loans.

10. October 29, 1929 Because investors were consumers – they had NO money to buy things. Because investors were consumers – they had NO money to buy things. Businesses couldn ’ t sell products. Businesses couldn ’ t sell products. Laid off workers. Laid off workers. Who couldn ’ t buy things then. Who couldn ’ t buy things then. Businesses failed. Businesses failed.

11. October 29, 1929 Because investors couldn ’ t pay loans back to banks.. Because investors couldn ’ t pay loans back to banks.. Because businesses couldn ’ t pay back loans to banks Because businesses couldn ’ t pay back loans to banks Because banks had also been speculating on the stock market with savers ’ money … Because banks had also been speculating on the stock market with savers ’ money …

12. October 29, 1929 Banks are rumored to be failing Banks are rumored to be failing Bank runs to try to get money out of banks. Bank runs to try to get money out of banks. But THERE WAS NO MONEY! But THERE WAS NO MONEY! BANKS FAIL and close. BANKS FAIL and close.

13. October 29, 1929 Because Americans have no money to invest Because Americans have no money to invest  Global investments fall  Unemployment happens in other countries  The rest of the world can not afford US goods  Europe can ’ t pay off their war debts to US businesses  Closes more US factories

14. October 29, 1929: The Great Crash It wasn ‘ t enough! It wasn ‘ t enough! Tuesday – people panicked. Tuesday – people panicked. 16 million shares were sold. 16 million shares were sold. When there is more supply than demand When there is more supply than demand  PRICES GO DOWN, DOWN, DOWN, DOWN

15. October 29, 1929: The Great Crash Overall losses $30,000,000,000 Overall losses $30,000,000,000 The business cycle – a period in which the economy grows then contracts. The business cycle – a period in which the economy grows then contracts.

16. The Ripple Effect of the Crash Someone who thought and lived like they had a million dollars Someone who thought and lived like they had a million dollars  Found out they only had $100.

17. Ripple Effect on the Economy 1. Risky loans hurt 1. Risky loans hurt banks banks  Banks earn their profits on the interest they earn for loaning out money.  Gave out HUGE amounts of loans on very risky loans.

18. Ripple Effect for the economy 2. Consumer 2. Consumer borrowing: borrowing:  Banks also make money on loans they make to consumers to buy cars, appliances, etc.  Consumers lost money and / or their jobs and could not pay their debts to the bank.

19. Ripple Effect on the Economy 3. Bank Runs: 3. Bank Runs:  People rushing to the bank to get their money out.  Banks did not have enough money in the vaults to give people withdrawing.  Banks had to call in loans to get some money.  Consumers and businesses did not have the money

20. Ripple Effect on the Economy 4. Savings wiped out 4. Savings wiped out  By 1933 9 million savings accounts had vanished.

21. Ripple Effect on the Economy 5. Cuts in Production 5. Cuts in Production  Businesses had no money to keep producing goods.  Few people had the money to buy goods.

22. Ripple Effect on the Economy 6. Rise in 6. Rise in unemployment unemployment  Businesses laid off workers.

23. Ripple Effect on the Economy 7. Further cuts in production as unemployment grew and incomes shrank, consumers spent less and less money and businesses produced still fewer goods. 7. Further cuts in production as unemployment grew and incomes shrank, consumers spent less and less money and businesses produced still fewer goods.

24. Economic Contraction An economic decline marked by falling output of goods and services. An economic decline marked by falling output of goods and services.  THE GREAT DEPRESSION  Lasted until 1941