The End of ProsperitySection 1

Chapter 24

Focus QuestionsWhat was the stock market like before the

crash?What were the major causes of the Great

Depression, and how did it weaken the U.S. economy?

How did economic hard times affect Americans?

During the 1920s more Americans then ever owned houses and cars

80 million Americans went to movies

The Stock Market CrashRising stock prices was proof the economy was

healthyBull Market– continuing rise in stock market

pricesBear Market– continuing drop in stock prices

was unlikelyMany people investing in the stock market were

buying on margin– buying stocks on credit with a loan from a broker

Brokers borrowed their money from banks

The Stock Market Crash Speculation– Putting

money in a high-risk investment with the hope of making profit

Stock Market hit a high point in September of 1929

October 24, 1929– Black Thursday prices dropped and by noon $9 billion had been lost (bankers help recover the market)

October 29, 1929– Black Tuesday the market completely collapsed

The Stock Market CrashThose who bought on

margin lost everything Investors had to sell

everything to return money they owed

The nation then became locked down in a downward economic spiral known as the Great Depression

The Economy CollapsesBanks were hurt in two ways

Banks and small investors suffered great losses from their stock investments

They had encouraged their customers to buy stocks (even risky investments)

Customers could not repay their bank loansMany banks then closed

The Economy CollapsesThe closing of banks

caused people to panic and millions rushed to withdraw their deposits

Many banks ran out of money and shut their doors

Millions of people lost their life savings

The Economy CollapsesBanks closing left

businesses without corporate savings and operating accounts

Businesses were then forced to close or to stop any expansion

The CausesThe business cycle is a system in which

surplus leads to layoffs but eventually the surplus is bought and businesses bounce back (this was NOT the case)

Before 1929 the economy followed the business cycle and recovered on its own

Most agree that overproduction and global trade problems helped cause the Great Depression

The CausesBetween 1920-1929

productivity rose 43 percent

The markets in the late 1920s stopped expanding

The distribution of wealth was also a problem (1 percent of the population owned about one-third of all personal property

The CausesMost Americans could

not afford to buy products

Europeans still recovering from World War I could not afford American products

High tariffs made it difficult for European citizens to buy American goods

The Depression Hits Home

Unemployment drove some Americans to theftState and local governments and private

charities raised money to help poor and unemployed Americans

Need was far greater than availabilityMany people became angry with little federal

government help

The Depression Hits Home

Bonus Army—veterans who became upset with the government and wanted their World War I bonus

Herbert Hoover saw the Bonus Army as a dangerous mob and ordered federal troops to restore order

The Depression Hits Home

Troops drove the veterans from their camps with bayonets and tear gas

The incident led many to criticize President Hoover

President Hoover Fights Back

Hoover felt that relief and recovery should come largely through voluntary cooperation rather than federal efforts

Hoover did approve the Reconstruction Finance Corporation (RFC) that lent money to railroads, banks, and other businesses to keep them running ($1.5 billion in 1932)

President Hoover Fights Back

Hoover failed to realize how serious the depression was

As the Depression war on, many felt the federal government should play a greater role in fixing the economy

Focus QuestionsWhat was the stock market like before the

crash?What were the major causes of the Great

Depression, and how did it weaken the U.S. economy?

How did economic hard times affect Americans?