Opening Assignment
• Would you borrow money to invest in
the stock market if it was easily
available? What stock would you buy?
• How might this be very profitable for
you?
• How might this end very poorly for
you?
Essential Learning Goal and
Learning Targets
• Essential Learning Goal:
• The student will understand the causes and effects
of the Great Depression and the New Deal.
• Learning Targets:
• The student will recognize the significance of the
Stock Market in the financial/economic collapse of
the late 1920’s.
• The student will identify the causes of the Great
Depression.
The Stock Market Crash
• In early September 1929, stock prices
peaked and then fell.
• Confidence in the market began to waver,
and some investors quickly sold their stocks
and pulled their money out.
• On October 24, 1929, the market took a
plunge. Panicked investors sold their shares,
but the worst was yet to come.
Stock Market Crash
• BLACK TUESDAY was the name given to October 29, 1929 the
day the stock market collapsed
• Shareholders frantically tried to sell before prices dropped even
lower. A record 16.4 million shares of stock were sold that day.
• There were millions of additional shares that traders were
looking to sell, but they could not find buyers.
• People who had bought stock on credit were stuck with huge
debts as prices plummeted, while others lost most of their
savings.
Stock Market Problems of the time.
• By 1929 about 4 million Americans, or only 3% of the
population owned stocks.
• A common practice among investors was to engage in
SPECULATION, buying stocks and bonds on the chance of
a quick profit, while ignoring the risks.
• In addition many people began BUYING ON MARGIN,
paying a small percentage of a stock’s price as a down
payment and borrowing the rest of the money to
purchase the stock. These people expected to pay off
this debt once they made a profit with their newly
purchased stock.
• Today investors can not use credit to purchase stocks.
Financial Collapse
• The Stock Market Crash of 1929 signaled the beginning of
the Great Depression, but was a symptom of the
Depression and not an initial cause.
• The Stock Market Crash did cause a financial collapse.
• People panicked and withdrew their money from banks,
this placed a strain on banks because many had invested
the money with which people entrusted them.
• In 1929 600 banks closed. By 1933, 11,000 of the US’s
25,000 banks had failed. Millions of people lost their
savings.
A Bank Run in progress.
International Trade Halts
• In 1930, the US Congress passed the HAWLEY-SMOOT TARIFF
ACT, which established the highest protective tariff in US history.
• This law was designed to protect American farmers and
manufacturers from foreign competition.
• The law had the unintended consequence of reducing the flow
of goods into the US, the tariff prevented other countries from
earning American currency to buy American goods.
• The Tariff made unemployment worse in industries that could no
longer export goods to Europe.
• Many countries retaliated by raising their own tariffs. Within a
few years, world trade had dropped by more than 40%.
Financial Collapse
• Other businesses were hit as well.
• Between 1929 and 1932 the US Gross National Product
was cut nearly in half, from $104 billion to $59 billion.
• Gross Nation Product is the measure of the nation’s total
output of goods and services or the total amount of
money changing hands each year.
• As the economy collapsed millions of workers lost their
jobs.
• Unemployment jumped from 3% in 1929 to 25% in 1933
Causes of the Great Depression
• Tariffs and war debt policies that cut down the foreign market
for American goods.
• A crisis in the farm sector.
• The availability of easy credit.
• The unequal distribution of income.
• These factors led to falling demand for consumer goods, even
as newly mechanized factories produced more products.
• The Federal Government contributed to the crisis by keeping
interest rates low, thereby allowing companies and individuals
to borrow easily and build up large debts.
• Financial Collapse of US banks and business failures.
HOMEWORK
• Read Pages 472 – 477
• Complete the Worksheet and the
writing assignment on the hardship and
suffering that many Americans faced
during the Great Depression.