1. Only a Fool Holds Out For Top Dollar
Ch 22 Sec 1

2. Clouds on the Horizon 1920’s wild economic boom ensured hard crash
Unregulated economy combined with overzealous investors
A slowing economy ignored
Industry
Large corporations profits continually shrank during decade
Energy companies slowed following WWI & new competition
Housing starts slowed
New homes lead to many job opportunities for multiple industries

3. Agriculture
Massive increase of production lowered prices
Farmers no longer could afford to pay back loans & defaulted
Caused banks to lose vast amounts of money
Price supports
Plan to have government buy excess food at set cost to give stability to farmers incomes
Vetoed by President Coolidge twice arguing that it was un-American & anti-capitalist

4. Consumers spending on borrowed time
Consumer spending
rising prices, stagnating incomes led to Americans spending more than they made
Credit
Many consumers turned to credit to buy items but pay later w/ interest charges
Large debts by American families led to a reduction in buying

5. The wild bull in the stock market
Individuals bought into stock market as a way to make quick cash (speculation)
Massive stock purchases caused the Dow Jones Industrial Average (30 largest companies in America) to soar…causing more people to buy into the market
Consequence—stocks became valued more than what they were really worth on buying frenzy

6. Buying frenzy led to individuals buying stocks on margin
Placing 25% money down to purchase stock and borrow the rest of the money
Consequence—people invested life savings (hard money) into overvalued stocks (paper money)
If stocks fell, people would lose their hard money

7. The Storm Stock Market crashes as investors become very nervous
Investors realized that stocks and the US economy was “overvalued”
Worth more on paper than in hard money
Black Tuesday 10/29/29
16.4 million shares sold in one day
As stock values fell, people who bought stocks at high price sold at low value, losing money
Two weeks later, the NYSE lost $30 billion in value

8. The Collapse Banks Businesses
People rushed to bank to pull hard money back
Problem—many banks invested hard money in stock market…losing it in the crash
1929—600 banks declared bankruptcy (1933 ½ of 25,000 banks failed)
Businesses
Americans without any money cannot buy goods
Lack of consumption leads to companies cutting production & jobs
Unemployment—1929, 3% , 25%
American economy collapses as people out of work, can’t buy items
US Gross Domestic Product (all goods bought in US)
GDP—1929, $104 billion…1933, $59 billion

9. International economies
European nations still struggling from WWI relied on strong US economy to export goods
Germany trying to repay massive WWI war reparations
US raises tariffs (Hawley-Smoot) to all-time high
European countries cannot buy US goods
US economic bust plunged world into economic depression