1. CHAPTER 15 SECTION 1 PAGES 442-447

2.  Some voices warned of problems within US economy  Nations agricultural crisis  “Sick” industries  Reliance on credit  Stock speculation on overheated market  Widespread prosperity led most Americans to believe economy would continue to grow

3.  By 1929 total number of credit purchases was 6 times higher that 1915  Reached a total of $7 billion  Federal government kept interest rates low during 1920s  Experts said that easy credit would promote business, but credit load could hurt consumers in a downturn  People ignored and continued to buy on credit

4.  Investors paid millions into market  Bull Market– upward trend in prices  Bear Market– downward trend  Speculation– buying and selling to make a quick profit  Inflated prices– some were selling for more than they were worth  Margin buying– purchasing stock with borrowed money  As little as 10% of price  Once prices fell investors found themselves deep in debt

5.  October 24, 1929 “Black Thursday”  Large number of shares sold by nervous investors  Confidence fell and prices plunged– Panic set in  J.P. Morgan and other Bankers bought stocks at end of session to stop plunge

6.  OCTOBER 29, 1929  Investors dump more than 16 million shares of stock on market  Chain of events  Brokers demand cash to payoff loans given to margin buyers  Investors sold stock to cover losses  Repeat steps 1 and 2, over and over  By mid November stocks had lost $30 billion

7.  Officials called it temporary and minor  Herbert Hoover– “We have now passed the worst and… shall rapidly recover”

8.  Only a small percentage had money invested in stock market  Banks suffered significant losses  Worst crisis came when borrowers defaulted on loans  Some banks were forced to close  Depositor wanted their savings  Between 1930-32– 5,000 banks failed

9.  Consumers were unwilling to buy products– especially on credit  Businesses forced to trim inventories and scale back production and layoff workers  26,000 business went bankrupt in 1930  28,268 in 1931  1929 Gross National Product was $103 billion by 1933 fell to $56 billion  Unemployment reached 23.6% by 1932– 3.2% in 1929

10.  Stock Market crash was not sole cause of our depression  Global Depression  Income gap  Consumer debt  The business cycle

11.  U.S. Depression blamed on state of finances following WWI  World trade declined– foreign consumers unable to buy American products  Industry stuck w/ large surpluses  Smoot-Hawley Tariff of 1930  Highest in U.S. history  U.S. tariffs contributed to global depression  Eliminated U.S. market for imported goods– accelerating depression

12.  Unequal distribution of income  Between 1923-29 disposable income of wealthiest 1% of America grew by 63%  Meanwhile poorest 93% disposable income decreased by 4%

13.  Most people did not have buying power needed to boost economy  Some bridged gap by buying on credit  Reliance on credit contributed to economic chaos  Once depression hit government raised interest rates and consumers could not pay debts

14.  Some experts believe depression was inevitable part of business cycle  All economies go through ups and downs with free enterprise  Length and severity of Great Depression went beyond normal rhythms of business cycle