1. Great Depression

2. How does the stock market work?

3. Economic Expansion Partially based on optimism
Farmers saw incomes fall
High Gross National Product (GNP)
Total value of goods and services produced in a nation
Low unemployment
Satisfied workers
Performance of stock market

4. Investment Many Americans invested because of stories of fortune
Peddler tale
Safe way to make money
John Raskob quote p. 74
Peddler made 250,000 with 4,000 dollars.

5. Wealth distribution
Top 5%=70% of income
Bottom 95%=30% of income
Credit allowed people to buy goods, but they finally reached their credit limit and purchases slowed down
Problems

6. Problems cont. Use of credit for stocks Fed limited margin loans
Buying on margin
Margin call
Fed limited margin loans
Corporations provided cash against this
Why?
Problems cont.

7. Economist Roger Babson predicted a crash but was largely ignored
Economists views

8. Stock Market Crash Oct. 24, 1929 some investors started selling stocks
Began a huge sell off
At the end of the day a number of bankers purchased stocks to stop panic
Oct. 29th Black Tuesday
Largest drop in stock value in a single day (half of the market’s value)
John Hersch
$3,000 dollars lost in the stock market
Stock Market Crash

9. Do you think this could happen today?

10. Effects Individuals Banking Crisis Often owed money for stocks
Forced to sell below cost
Banking Crisis
Rush to withdraw money
Banks invested too
Stock brokers default on loans

11. Effects cont. Business Overseas Money not available to businesses
Consumers cut spending
Overseas
Fragile European Economies
(WWI)
Ripple Effect

13. Review