The Great Depression Begins 1929-1932

Chain Reaction of Economic Failures 1. Bull Market Enticed buyers to buy on margin and pushed prices up without regard to value 2. Speculation Buyers made risky stock purchases without regard to a company’s earnings and profits. People were betting on the bull market

Chain Reaction of Economic Failures 3. Stock Market Crash Once professional investors sensed stocks were overpriced and began selling, panic selling and margin calls began. Then stock prices dropped 4. Bank Runs Speculators could not repay loans to banks. Banks did not have cash reserves to fulfill the withdrawal demands. People panic and rush the banks for their money

Chain Reaction of Economic Failures 5. Bank Failures Banks failed when they could not fill withdrawal demands. News of the failure cause other runs and more bank failures 6. Installment Debt People bought expensive goods on installment plans. Paying off installments forced buyers to stop buying new things

Chain Reaction of Economic Failures 7. Mass Layoffs Consumption fell as workers lost jobs -> Manufacturing slows down -> business failures -> layoffs 8. Hobos Some people were so poor they became homeless. Men took to “riding the rails,” traveling, and performing odd jobs