The Aftermath of Black Tuesday
How the Depression affected the lives of Americans
In the U.S., the 1920s was a
decade of prosperity.
• Bold cultural ideas
• New inventions
available to broad
audiences
• CONFIDENCE in
the U.S. economy
How did the U.S. Economy grow
so much in the 1920s?
• Lots of new
inventions
–
–
–
–
Automobiles
Radios
Telephones
Telegraphs
• Lots of supply,
not enough
demand
• Solution?
Supply
Demand
Financing!
• 60% of Americans
financed automobiles in
the 1920s
• 80% of Americans
financed radios in the
1920s
• Created an artificial
demand (people were
imagining they had
money that they didn’t)
The Stock Market in the 1920s
• A stock is a
percentage – a piece of a company.
• The value of stock is
based on confidence in
the total market for
stocks, not the actual
profits of that one
company.
• The overall value of
stock increased 120%
from 1925-1929.
The Upward Spiral
(or so it seemed…)
Americans borrowed money not just to buy
goods, but also to buy stocks.
Desire to
invest in
stocks
Increased
Spending
Economic
Confidence
Economic Danger Signs of the
1920s
• Over-speculation on
stocks with borrowed
money
• Large gaps between
the rich and poor
• Post-WWI
international economic
slump
Income Inequality
Black Tuesday
• As rumors spread about inflated stock value, Americans started selling.
• Greatest stock market crash in U.S. History on October 29,1929
A wave of panic-selling hit!
What happened to consumers?
• Consumers were
afraid of economic
failure, so they
stopped spending
money.
• Businesses lost the
profit they relied on.
• Businesses closed.
What happened to workers?
• As businesses
lost money,
salaries were
lowered and
many workers
were laid off or
fired.
• Many businesses
couldn’t hire the
unemployed
because they
didn’t have the
funds to pay
salaries.
Unemployment
24% - 50% of Americans were unemployed at the peak of the
Great Depression.
The Downward Spiral
Businesses lay
off workers
Less money
to spend
Businesses
can’t afford to
pay workers
Businesses
lose profit
What happened to homeowners?
• As homeowners lost
their jobs, they
couldn’t afford to pay
their mortgages.
• Banks foreclosed on
loans.
• Homeowners became
homeless.
On an international scale…
• During WWI and after the war, billions of
dollars were loaned to European Allies
• Allies struggled after WWI and couldn’t
repay the money
• The U.S. increased tariffs to gain some of
the money back in trade $ (Hawley-Smoot
Tariff) – BAD IDEA!
• European countries retaliated with tariffs as
well.
Bank Closings
• With so many
mortgage
foreclosures,
banks could not
return
depositors’
money
• Banks closed.
• Depositors lost
everything.
Open Banks in the U.S.
30,000
25,000
20,000
15,000
10,000
5,000
0
1926
1928
1930
1932
1934
1936
1938
1940
How now would you
provide for your family?
• Many moved west in
search of work,
afterall, farms will
need workers as long
as people need to eat!
• EXCEPT…
The Dust Bowl
• Caused by bad farming practices in the 1920’s (lack of crop
rotation and overplowing)
• Drought and wind caused the land to be unfarmable.
Effects of the Dust Bowl
• Farm
foreclosures
• Food became
scarce.
• Dust got in
everything!
The Great Depression
• People were desperate.
• Americans blamed
themselves
• Suicide rates at an alltime high
• It seemed there was no
end in sight.
Is it time for a change?
Presidential election of 1932
• Time for a change!
• Herbert Hoover vs. Franklin Delano Roosevelt