The Great Depression

1. She was the first to fly solo nonstop across Atlantic

2. Added to the Constitution that legalized alcohol3. The women of the 20s became known as 4. Term for an illegal bar or underground 5. He was the first to fly solo nonstop across Atlantic6. The largest bootlegger that created an empire in

Chicago by killing his competition7. List three things that describes the women of the

20s8. Added to the Constitution that ban the sale and

manufacture of alcohol9. He was a baseball legend who hit 60 homers10. Term for smuggling alcohol illegally

Election of 1928

What happens to the price of items as the demand increases?

What happens to the price if the demand decreases?

Demand = Price

Demand = Price

The Law of Supply and Demand

Honus Wagner baseball card

(1909 )

Demand

Only 50 – 60 Honus Wagner baseball cards exist in the world.

+

+Supply

=

=Price

The card is valuable because of its scarcity. In 2007, a mint copy was sold for $2.35 million.

The Law of Supply and Demand

Hannah Montana stickers

Demand

Available almost everywhere.

+

+Supply

=

=Price

Even though there is a large demand, there is a lack of scarcity. Sells for $1.50.

The Law of Supply and Demand

A small pile of dirt.

Demand

Available almost everywhere.

+

+Supply

=

=Price

No scarcity and no demand. Therefore, this pile of dirt is virtually worthless.

The Law of Supply and Demand

GI Joe Action Figure

(1964 )

Demand

In “good” condition.

+

+Supply

=

=Price

A 1964 GI Joe in good condition is relatively scarce. This one is for sale on Ebay for $350.00

The Law of Supply and Demand

British poster during WWI asking people

to preserve food.

Demand

U.S. farmers sold farm products to the European powers in large numbers.

+

+Supply

=

=Price

Due to an increase in scarcity, the price of U.S. farm goods increased.

How does the stock market work?

You buy 100 shares of stock ofx $5.00 per shareHow much money

have you invested? $500.00

Scenario #1

stock increases to $20 per share

100 shares of stockx $20.00 per share

How much are your 100 shares of stock now worth?

$2,000.00

How much profit have you made?

$2,000.00 stock value

- $500.00 initial investment

$1,500.00 net profit

How does the stock market work?

You buy 100 shares of stock ofx $5.00 per shareHow much money

have you invested? $500.00

Scenario #2

stock decreases to $1 per share

100 shares of stockx $1 per share

How much are your 100 shares of stock now worth?

$100.00

How much money have you lost? $100.00 stock value

- $500.00 initial investment

$400.00 net loss

Buying Stocks on Margin: Scenario A

investor stock broker

Hello, sir. I would like topurchase 100

shares of stock in the Ford

Motor Company. How much is it going

to cost me?

Buying Stocks on Margin: Scenario A

investor stock broker

Well, Ford stock costs

$10 per share. You

want tobuy 100 shares?

Figure it out yourself,

smartguy!

Buying Stocks on Margin: Scenario A

investor stock broker

Ummm…100 shares

x $10 per share

= $1,000.00

Oh, well. I only have $100. I can’t afford 100 shares.

Buying Stocks on Margin: Scenario A

investor stock broker

No, problem! Just give me $100 and you can owe me

the rest!

Buying Stocks on Margin: Scenario A

investor stock broker

Like, how muchwould that be? Let me think…

$1,000 worth of stock - $100 paid

= $900 owed

Alright, it’s a deal!!

Buying Stocks on Margin: Scenario A

investor stock broker

Six months later, Ford stock doubles to $20 per share.

My 100 shares are now worth...

100 shares x $20 per share

$2,000

Buying Stocks on Margin: Scenario A

investor stock broker

That’s great! Now pay me the $900 you

owe me!

Buying Stocks on Margin: Scenario A

investor stock broker

No problemo! It was a pleasure doing business

with you!

Buying Stocks on Margin: Scenario A

investor

Now let’s figure out how much money I made!

$2,000 net worth - $900 owed

$1,100 profit

- $100 initial investment

$1,000 net profit

I’ll pay the debtor when I make

more…it’s only $900. I already

have $2000 anyway..

Buying Stocks on Margin: Scenario B

investor stock broker

Six months later, Ford stock decreases to $1 per share.

My 100 shares are now worth...

100 shares x $1 per share

$100

Buying Stocks on Margin: Scenario A

investor stock broker

Too bad, hotshot! You still owe me

$900!

Buying Stocks on Margin: Scenario A

investor stock broker

But I’m broke! What am I going

to do!

Located in lower Manhattan, New York.

It is a street that features many large financial office buildings and companies where stocks are traded, including:

NYSE New York Stock Exchange, NASDAQ

, AMEX American Exchange, NYMEX New York Mercantile Exchange, NYBOT New York Board of Trade

etc.

Wall Street

New York Stock Exchange. Stocks and shares are bought and soldLocated in Wall StreetNation marketplace

People buy (and “invest”) stocks and shares to earn $MONEY$. They believed money would “multiply”.

Buying stocks at LOW, and selling at HIGH.

For example, when 1,000 shares of stocks is put into $1.00 worth stocks that rise to $1.50, $500 is earned.

“If a man saves $15 a week, and invests in good common stocks, and allows the dividends and rights to accumulate, at the end of twenty years he will have at least $80,000 and an income from investments of around $400 a month. He will be rich. And because income can do that, I am firm in my belief that anyone not only can be rich, but ought to be rich.” – John J. Raskob

John J. Raskob

Major investor Will Payne, stated that the Wall Street Stock Exchange had become such an easy way to make money that it ceased to be a gamble, because in a gamble, someone loses – but when invested in stocks and shares, “everybody wins”.

People thought the market could sustain the growing high prices, “Stock prices have reached what looks like a permanently high plateau.” – Irving Fisher.

Irving Fisher

People begun to speculate (buying on stock in hope to make quick profit, ignoring risk)

people began to buy stocks on margin, (pay on installment).

Stocks rose by 65%.Wages increased by 25%.People began borrowing

money to invest.• On Thursday, October 24,

1929, some nervous investors began selling their stocks and others followed, creating a huge sell-off with no buyers

• Stock prices plunged, triggering an even greater panic to sell.

• Black Tuesday, October 29, 1929 Stock Market Crashes

+65%+25%

America’s wealth in the 1920’s

UH

OH

!

• On October 24th, 12,894,650 shares were sold, setting the record in its time. Then, on October 29th, approximately 16.4 million shares were traded, breaking the record that was set 5 days earlier,

The GreatThe Great DepressionDepression

                           

1. Unequal distribution of income, too little money in the hands of working people.

2. Availability of easy credit (installment plans)

3. Decrease in demand of durable goods (product that last several years)

4. More competition due to new inventions

5. Crisis in the farm sector – OVERPRODUCTION (produce more than they could sell)

Causes of the Great DepressionCauses of the Great Depression

• The wealthiest one

percent income grew

75 percent, but the

average worker saw

under a 10 percent

gain.• rising prices swallowed

up any increase in salary

• 70 percent of U.S.

families had too low an

income for a good

standard of living.

• Four out of every five

families couldn’t save any

money during the so-

called boom years.

Credit allowed Americans to buy expensive goods, but by the end of the decade many people reached their credit limits, and purchases slowed.

Warehouses became filled with goods no one could afford to buy.

brokers demanded investors to pay back loan

investors forced to sell their stocks for far less than they had paid,

3rd Sep, 1929

13th Nov, 1929

% loss

American Can

$1.82 $0.86 53%

Anaconda Copper

$1.62 $0.70 57%

Electric B&S

$2.04 $0.50 77%

General Electric

$3.96 $1.68 58%

General Motors

$1.82 $0.36 80%

New York Central

$2.56 $1.60 38%

Radio $5.05 $0.28 94%

US Steel $2.79 $1.50 46%

Westinghouse E&M

$3.13 $1.02 67%

Woolworth $2.51 $0.52 79%

Effects on Banks• frightened depositors rushed

to withdraw their money, draining the bank of funds.

• When investors couldn’t repay margins, banks lost money, too.

• 6,000 banks closed.

•Many banks themselves had invested directly or indirectly in the stock market by buying companies’ stocks or by lending brokers money to loan to investors on margin.

•Bank closures wiped out billions in savings by 1933.

Impact on Business

• Businesses crashed, because banks couldn’t lend money.

• Consumers cut back their spending on everything but essentials,

thousands of farm foreclosure ( when an owner cannot pay for their mortgage and the bank repossesses the property to sell it.)

companies were forced to lay off workers when demand decreased.

Unemployed workers had even less money to make purchases

nearly 3 million people lost their jobs.

Employment Employment LineLine

12 million people went out of work,

12,000 people was made unemployed everyday,

20,000 companies and 1616 banks had gone bankrupt, and

23,000 people committed suicide in one year – the highest ever.

The total loss by the end of the next week amounted to $30 million dollars, ten times more than the annual budget of the federal government, far more than the U.S. had spent in all of World War 1.

Contributing to The Great Depression.

• Exhausted

soil• Drought

enter 1930s,

Migrants

• By the end of the 1930s, 2.5 million people had left the Great Plains states.

• Many headed along Route 66 to California, then settled in camps and sought work on farms.

• The migrants were called Okies, after the state of Oklahoma, but migrants came from many states.

Hand’s off PolicyMinimal

government intervention

Questions of Credibility

Hoover eventually saw the limitations of his ideals and pushed for some direct relief, but his optimistic claims about the economy undermined his credibility with voters.

Early on, when millions lost their jobs, he said the nation’s basic economic foundation was sound.

Just a few months after the crash he announced “I am convinced we have passed the worst,” and he spoke glowingly about the relief efforts.

Millions of Americans did not share Hoover’s viewpoint.

Questions of Compassion

Many Americans came to question Hoover’s compassion.

As economic conditions grew worse, his unwillingness to consider giving direct relief to the people became hard for most Americans to understand.

When Hoover finally broke his stated beliefs and pushed for programs like the Reconstruction Finance Corporation, people wondered why he was willing to give billions of dollars to banks and businesses but not to individuals.

•Some who lost their homes lived in shantytowns, or Hoovervilles,

The Hoover Dam.

•The dam harnessed the Colorado River to provide electricity and a safe, reliable water supply to parts of seven states.

•The federal government provided the funding for the project ($800m)

Edlyn 2000-2005Mary lynn 1931-1934Glenn 1976-1980Matthew 2006-2010Kristine 1961-1965Edward 1986-1990Andrew 1920-1925Tracy 2001-2005Alexandra 1946-1950Thove 1936-1940Sirena 1996-2000