3 The Stock Market CrashThe summer of 1929 many thought the stock market boom might end and started selling stockBy October more were sellingStock prices fellThose who had bought on margin were asked to put up the moneyInstead they sold their stock
4 The Stock Market Crash cont. Prices dropped moreBlack Tuesday-October 29, 1929-a wild stampede of sellingPrices crashed until their were no buyers for the stockMany lost fortunes
5 Poor Banking Practices which lead to collapse of the banking system (The Federal Reserve did not act)
6 Bank FailuresIn the 1920s banks loaned large sums of money to investorsWhen the stock market crashed investors (borrowers) couldn’t repay loans (they defaulted)Banks couldn’t give depositors their money when they came to withdrawBanks were forced to close(5,000 between 1929 and1932)Many lost their life savings
8 Tariffs on ImportsU.S. was charging high tariffs on imported goods to reduce competition with American factoriesThis practice discouraged international tradeNot only did it prevent Americans from buying cheap foreign goods but it reduced the foreign demand for American factory made goods which were in great supply.
9 Overproduction of goods on farms and in factories
10 OverproductionFarms and factories produced more goods than people could buyWages did not rise as much as prices in the 1920sWorkers couldn’t afford to buy all of the goods being produced
11 Downward Trend to Depression Stock Market crash ruined investors, therefore businesses couldn’t grow and expandBanks closed so businesses couldn’t borrow moneyFactories cut wages or made layoffsUnemployed workers didn’t have much money to spend.
12 Continued Downward Trend Workers bought less, therefore the demand for goods droppedMore businesses went bankruptAnd on, and on, and on … … …