American History Chapter 15: Crash and

DepressionI. The Stock Market Crash

Objectives

• Learn about events that led to the stock market’s Great Crash in 1929.

• See how the Great Crash produced a ripple effect throughout the nation’s economy.

• Become familiar with the main causes of the Great Depression.

Bell Ringer

• What would happen if you went to your bank and asked to withdraw money from your savings account and were told that there is no money.

• What might cause that situation?

• What options would you have?

• What do you know about the Great Depression. (page 508)

A) The Market Crashes

1) Dow Jones Industrial Average: an average of stock prices of major industries

• September 3rd all time high – 381 /8018• Stock prices were higher than what they were worth• Black Thursday – Oct 24 – dropped 21 points in last

hour GE 400 – 2832) Black Tuesday: Oct 29th – record number of stocks

sold the great crash3) Great Crash: collapse of the stock market 381-198

– 30 billion in losses4) Business cycle: the periodic growth and

contraction of a nation’s economy

B) The Ripple Effect of the Crash• At first only investors hurt – did trickle down• Risky loans hurt banks – with the crash the business lost

could not repay • Consumer borrowing – people borrowed to buy things – loans

recalled• Bank runs – people rushed to get money out of banks –

called in loans – business that were hurt couldn’t pay• Bank failures – banks that couldn’t pay went broke• Savings wiped out – when banks went so did savings• Cuts in production – can’t borrow to expand, nobody had

money to buy anyway• Rise in unemployment • Further cuts in production – unemployment grew and

incomes shrank – consumers spent less and business produced less

• Economic Contraction – decline marked by falling output of goods and services – long one is called a depression

5) Great Depression: most severe economic downtown in the nation’s history

• Factories closed – small business next – farm prices fell – 1932 – 25% of work force unemployed – GNP dropped in half

• World nations interdependent – US quit investing in Germany – Germany suspended reparation payments – Alias quit repaying war loans to US

C) Underlying Causes of the Depression• An unstable economy – most money in the

hands of few rich – not consumers/ industry produced more than could be bought/ Farmers and workers not getting money

• Over speculation – people bought stocks and used those stocks as collateral to buy more – money is all borrowed, not there

• Government polices – the FED did not lower interest rates after crash to increase money supply

Review

• What events led to the stock market’s Great Crash in 1929.

• Why did the Great Crash produce a ripple effect throughout the nation’s economy?

• What were the main causes of the Great Depression?