Characters Bankers (3 people) Stock Brokers (1 person) Company Workers (the rest of the class)
Bankers Banks will hold people’s money, providing them with interest rate of roughly 2% Bank buys radio company stock with customer money Bank makes money if stock value increases If you make money, you can pay customers back plus interest which increases your profit margin
Stock Broker Lend customers money who can’t afford radio company stock You can ask for the money back at almost any time (we call this the margin call) If stock value goes up, you’ll get your loaned money back plus interest
Company Workers…You Have Options Buy Stoddart Radio stock If the stock value goes up, you can sell it and make money! Save money in the bank If the bank is safe and secure, you’ll earn interest on your money! Store money under your mattress If the stock value goes up, your boss can pay you more, which means you’ll save more!
Week 1 Stock price value is $30 Bank is paying 2% on savings in banks Brokers are asking for 33% down payment on stock sales on margin Corporate Analysis suggests Stoddard Radio is a booming company
Week 2 Stock price value is $50 Bank is paying 2% on savings in banks Brokers are asking for 20% down payment on stock sales on margin Corporate Analysis suggests Stoddard Radio is a booming company
Week 3 Stock price value is $100 Bank is paying 2% on savings in banks Brokers are asking for 10% down payment on stock sales on margin Corporate Analysis suggests Stoddard Radio is a booming company
Week 4 Stock price value is $150 Bank is paying 2% on savings in banks Brokers are asking for 10% down payment on stock sales on margin Corporate Analysis suggests Stoddard Radio is a booming company
Week 5 Stock price value is $100 Bank is paying 0.1% on savings in banks Brokers are calling in all margin calls Stoddard Radio continues to supply the nation with radios
Week 6 Stock price value is $20 Anyone with money in bank should move to back of the room Brokers are calling in all margin calls Corporate Analysis: Stoddard Radio has flooded the market of radios! Lay-offs are imminent!
Takeaways Buying on Margin (Review) Making a small cash down payment to own stock Broker holds on to stock as collateral Payoff as stock prices rose Bull Market Prolonged period of rising stock prices (period of weeks 1-4) Margin Call Broker demands repayment of the loan at once
Takeaways Speculation Betting the market would continue to climb enabling them to turn a quick profit off the rising prices Bank Run Depositors decide to withdraw all their money at one time because they fear the bank will collapse Overproduction Making more goods than you can sell…led to many layoffs in this time period
Why it all matters… Bull market through 1920s…more people invest Bull market will only last as people continue putting money in Speculation prevalent throughout market…market values start to get bid up without reflecting true value of stock as buyers look for quick windfall Fewer new customers, investors panic and sell holdings, prices start to fall! October 29, 1929 (Black Tuesday): Stock Market loses between $10 billion and $15 billion…stocks fall by more than one-third
Why it all matters… Banking problems Banks invested in market to get higher returns…banks lost Due to losses, banks stop giving out as many loans and hurting the economy Some banks closed doors—no insurance for customers so people lost savings BANK RUNS! Nearly 3500 banks (over 10% in nation) closed by 1932
Assignment: Life in the Depression Using Chapter 18 Sections 1 and 2, you are tasked with writing a ONE-PAGE overview of how life changed between 1928 and 1932. You may do this from the perspective of one family or society as a whole. You are also required to make reference to at least 5 ideas discussed in class/textbook about life in this time period. You are expected to include the end of the Roaring 20s, the Stock Market crash, and the impacts it had on life to receive full credit
Think & Share In groups of 3, you are to share your one-page stories about life during the Great Depression with your classmates. Your job is to compare and contrast the stories written and think about the common themes. We will then share the common themes as a class to supplement the notes on the Great Depression.
The New “Normal” Over ¼ of the American workforce was unemployed Soup Kitchens & Bread Lines prevalent Families losing homes (Bailiffs needed to eject some people from the homes) Led to creation of shantytowns of shacks on public lands Nicknamed “Hoovervilles” as most people blamed president Hobos wandering along railways, walking, or hitchhiking across nation looking for work/homes
The Dust Bowl Farm Crisis: Post-war surpluses during the 1920s Plows uprooted grasses and soil needed for agriculture Prices dropped in late 1920s, many stopped cultivating Drought struck Great Plains…no water, no grass, soil dries to dust Winds led to major dust storms with dust settling over crops, roads, and livestock Many lost their land and moved west to California
Arts and Entertainment A release from the reality of life… Many more movies, radio shows, soap operas, writers
Art & Literature Steinbeck tells stories of poverty and misfortune Photographers (such as Dorothea Lange and Margaret Bourke-White) depicted the depression on average Americans Artists (such as Grant Wood) emphasized traditional American values
Hoover Responds to the Depression October 25, 1929: “Worst effects of crash upon employment will have passed during the next 60 days” Idea: Downplay public fears, avoid bank runs & layoffs in panic, and urge people to stay calm and rational Hoover beliefs American Individualism best Socialism reason Europe is struggling Why do those two ideas matter?
Hoover’s Ideas Meet with business and industry leaders They agree to not slash wages; lasts less than two years Public works funding to replace jobs Worked marginally, but costs lots of government $ Hoover refused to increase spending, raise taxes, or deficit spend Banking System Reworked Federal Reserve refuses to increase circulation Reconstruction Finance Corporation (RFC) made loans to business but could not meet need of economy
Citizen Help? Hoover strongly against relief programs that gave money directly to families Thought this should be through local governments and charitable groups Problem: lack of resources Emergency Relief and Construction Act (1932) $1.5 Billion in Public Works Programs and $300 million loans to states for relief programs 1 st time federal government supplied direct relief funds
Discontent in the Masses Hunger Marches Many organized by Communists “Feed the Hungry, Tax the Rich” Farmers protest Post-war problems Destroy crops to decrease the supply Bonus Marchers (“Bonus Army”) Post-WWI promise to $1,000 bonus to be paid in 1945 Bill to pay bonus sooner leads to soldier march on Washington Gets ugly...panicked officer kills veterans, MacArthur ignores presidential orders, soldiers tear- gassed veterans and destroy homes