T H E S LO W B U I L D T O B L AC K T U E S DAY

THE DEPRESSION HITS HOME

THE ECONOMIC BOOM

• In spite of European problems, the American economy was booming in the 1920s.

• American companies continued producing high volumes of items, expecting trade to continue at the high levels of the war years.

• Farmers, meanwhile, were experiencing the depression early because Allies were no longer needing to purchase food from the U.S.

• Factory workers were still paid low amounts.

THE INSTALLMENT PLAN

• Many Americans had bought things on the Installment Plan (a form of credit) but by the end of the 1920s were discovering they were at the end of their credit limits.

STOCKS AND THE MARKET

• Stocks are portions of companies people purchase. • The 1920s seemed like a boom time because many

Americans increasingly bought more stock in U.S. companies, hoping the good times would continue. • People often bought stocks on credit which was risky. • As long as prices (the value of the company rose), you made

money and could pay it back, but if the stock lost value, you were in trouble.

• A byproduct of people buying stock in a company is that the stock rises. This leads to more people buying the stock. The problem becomes if people stop buying what the company makes, a lot of people have been roped into buying stocks for companies people don’t trade with.

EUROPEAN PROBLEMS COME HOME

• Unfortunately, this is when Europeans stopped buying American items to try and fix their own economies.

• American companies had large surpluses because their items weren’t being bought.

• This led stock owners to sell their stocks, causing stock prices to begin to decline.

• Banks then began to demand payment for the loans people used to buy the stocks but the people didn’t have the money to pay them back.

BLACK TUESDAY

• As investors freaked out and began selling their stocks, they began withdrawing all of their money from the banks to pay bills. • On October 29, 1929, the Stock Market crashed.

It was the biggest loss of money on the stock market.

WASH, RINSE, REPEAT

• Because the Stock Market crashed, companies laid people off.

• This made the surplus stock grow, because less Americans could buy companies’ items.

• More people then went to the banks to withdraw all their money.

• More layoffs occurred….etc….etc…

RUNS ON THE BANK

• When people ran to get to their money out of a bank, it was called a “run on the bank.” • Banks loan money out

using the money put in. • When people took

their money out suddenly, many banks had to close completely.

CALLING IN THE LOAN

• At the same time, in an attempt to recoup the money they were losing, banks required people to pay ALL the money they were loaned or they would lose their house/car/etc.

CONTINUING THE CYCLE

• Unemployment and homelessness continued to increase, banks and businesses closed, and the economic depression in the U.S. then intensified the worldwide depression.