1. US History: Spiconardi

2. Declining Demand Industries like coaling, the railroads, and textiles (clothing) saw steady declines in demand as well as agriculture Economy didn’t suffer at first, as the automobile and construction industries carried the economy By 1926,construction spending dips $2 billion dollars How many homes does one need? How many plants does a company need? By 1929, automobile industry experiences a 33% drop in sales How long does a car last? How many did consumers need to own in the 1920s?

3.  Why the decline in demand?  Distribution of Income  In the 1920s, the rich grew richer. Middle – and lower-income America experienced a slight growth in wages.  The average American saw a 9% increase in disposable income  The wealthiest 1% of Americans saw a 75% increase in disposable income.  Wealthy Americans invested their income in the stock market  The majority of Americans didn’t have enough disposable income to continue purchasing radios, cars, etc.

5.  After stock prices soared in 1928, stocks prices plunged in 1929  Stocks had been overvalued  October 24, 1929 – “Black Thursday”  12.9 million shares of stock were traded that day for a loss of $4 billion  Americans panicked  To avoid further losses, J.P. Morgan & Co. puts up $20 million and begins to buy stocks to restore confidence

6.  While Morgan was able to help stocks rally the next day, many investors decided to sell their stocks rather than risk further losses. Sell! Yes! All of it!

7.  October 29, 1929 – “Black Tuesday”  After losing 13% of its value the previous day, 14 million shares traded for a loss of $14 billion  Rockefellers and others purchased large amounts of stock, as J.P. Morgan & Co. did, but the stock market continued to lose money all through November Floor of the New York Exchange shortly after the crash.

8. The New York Stock Exchange would not recover its 1929 losses until 1954

11. DEPOSIT  People put their money into a bank  The bank pays the depositor(customer) 2% interest on the money you put into the bank BORROW  Banks loan the customer’s money to people purchasing homes, cars, and either expensive items  The bank charges 6%-10% interest on consumer's loans (That’s how they are able to pay you interest on your account) Banks loan depositors’ money to other consumers Your Savings Acct.

13.  Millions of American investors lost all their invested money overnight  Many had purchased stocks on margin  Investors still have to pay back their brokers  Where do you get the money to pay them?  Bank savings account

14. Upon losing all his money, a White Plains man actually took his own life by jumping from this building on Westchester Avenue at Main Street.

15.  Everyone runs to the bank to withdraw their savings  Recalling an earlier part of the lesson, what does the bank do with your savings?  Loans it to consumers purchasing a car, home, etc.  If everyone runs to the bank to withdraw money, the bank will not have all that money on hand  Why not?  No one was paying back their loans

16.  Bank Failures  In 1929 659 banks folded  In 1930 bank failures increased to 1,350  In 1931 2,293 banks closed  In 1932 an additional 1,453 banks shut down

17. This goes on top of the overproduction, declining demand, and unequal distribution of wealth problems we discussed

18. Thank you, Andrew Jackson. You central bank killer! Without assistance from a central bank, the local banks could not survive.

19.  Hawley-Smoot Tariff Act (1930)  Raised tariffs on 20,000 imported goods to record levels  Europe responds by raising tariffs  Exports decreased 61% from $5.4 billion to $2.1 billion  Unemployment was at 7.8% in 1930 when the Smoot–Hawley tariff was passed, but it jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933* * U.S. Bureau of the Census; Social Science Research Council (1960), Historical Statistics of the United States, Colonial Times to 1957, Washington, DC