depression causes dr tech class

The Roaring 20’s• Fun times reigned

– Dancing– Flappers– Drinking

• The new concept of “credit”

• People were buying:– Automobiles– Appliances– Clothes

The 1920’s “Roared”! But… The 1920’s “Roared”! But… the economy grew “sick”the economy grew “sick”

• Many industries start to Many industries start to suffer suffer

• Farmers get hit the worst Farmers get hit the worst with the economic slow with the economic slow down down

• People buy more on People buy more on credit and build up debtcredit and build up debt

• Income becomes very Income becomes very unbalanced unbalanced

• The stock market soars The stock market soars as people speculate and as people speculate and buy on margin buy on margin

Farms and factories overproduced beyond the demand.

Overproduction / Reduction in PurchasingOverproduction / Reduction in Purchasing

People had little or no

money to spend.

Demand forgoods fell.

Businesses cut production

Workers sufferedfrom wage cuts

and lay offs.

A farm is being sold at a foreclosure sale in Iowa. Military police were on hand to keep farmers from disrupting the auction. ca. 1935.

What’s wrong with buying What’s wrong with buying on credit???on credit???

• Credit systemCredit system– People didn’t really People didn’t really

have the money they have the money they were spendingwere spending

• WWIWWI– The U.S. was a major The U.S. was a major

credit loaner to other credit loaner to other nations in neednations in need

– Many of these nations Many of these nations could not pay us backcould not pay us back

The Stock MarketThe Stock Market• People bought People bought

stocks on stocks on marginsmargins– If a stock is $100 If a stock is $100

you can pay $10 you can pay $10 now and the rest now and the rest later when the later when the stock rosestock rose

• Stocks fallStocks fall– Now the person Now the person

has less than $100 has less than $100 and no money to and no money to pay backpay back

Stock Market CrashStock Market Crash

• On Tuesday, October 29, 1929, stock prices plummeted.

• This became known as Black Tuesday.

• People that bought stocks on margin (credit) could not repay their debts.

The Philanthropist by, Herb Block (Dec. 5, 1930)

During the Great Depression approximately 25% of the workforce was unemployed. People who lost their jobs began selling five-cent apples on the streets of American cities, providing a symbol of the economic hardships of the era.

• People that had invested their savings in stocks had little or nothing left.

Bank FailuresBank Failures

• When the stock market When the stock market crashed, people could not crashed, people could not repay their loans to the bank.repay their loans to the bank.

• Banks were involved in stock Banks were involved in stock speculation and lost billions.speculation and lost billions.

• Therefore, banks couldn’t Therefore, banks couldn’t give depositors their money give depositors their money and banks closed.and banks closed.

• Many people lost their life Many people lost their life savings.savings.