The Great DepressionSocial Studies 9

The Stock Market A stock is a part of the ownership of a

company Companies sell stocks to earn money in

order to develop new products or to expand their company

In return, companies promise the stockholders a part of the earned profits

The Stock Market Le price a stockholder buys or sells its

stocks depends on the speculated (estimated) value of the company.

The price of stocks is never stable or guarenteedi

Buying stocks always involves a certain level of risk

Some people borrow money to invest in the stock market – this is called leveraging

The Stock Market

The Stock MarketCrash of 1929 Thursday, October 24, stock prices begin to

fall because of wrong speculation and rumours. Mass panic follows and stockholders sell 13 million shares in one day.

The fall in share prices and the ensuing panic continue.

Shareholders try to sell their stocks as fast as possible to reduce their losses, which creates a further drop in prices.

The Stock MarketCrash of 1929 This cycle continues until the entire

stock market crashes. October 29, 1929, known as “Black

Tuesday”, the New York Stock Exchange crashes.

This crash creates a wide-spread economic depression

The Stock MarketCrash of 1929

The Great Depression1. Millions of people fall into poverty2. Unemployment increases from 5% to

24% (15 million people are unemployed)3. Thousands of banks close and all

deposits are lost4. Unemployed men wander the country in

search of jobs (les hobos)les hobos

5. Banks foreclose on houses and families are evicted

6. The number of suicides increases

The causes of the Great Depression

1. Uneven distribution of wealth 5% of Americans own 30% of the

country’s wealth Only 70% of the population

earns enough money to live comfortably

2. Overproduction of goods and services Factories expanded rapidly and without

limits They are producing more goods than

can reasonably be sold or consumed, even after demand for these begins to fall

Companies are over-hiring, which causes high unemployment rates after the Crash.

3. Increase in personal debt People have been borrowing too much

money in order to buy new consumer goods and luxury items

Buy now, pay later! When the economy starts to slow down,

families cannot repay the high amount of personal debt they have accumulated and most is lost

4. The Stock Market Crash Investing in the stock market becomes like a

game (gambling) It is seen as an easy, fast way to make a lot

of money Confidence in the market is high People are borrowing money to invest

(leveraging) with only a 10% down payment When the stock market crashed, investors

loose not only the principle, but also accumulate more debt.

5. Natural Disasters In western North America, a severe

drought and a locust infestation ravages the agricultural farms

Dust Bowl

Natural Disasters Farmers cannot grow their crops and

harvests fail Farmers go bankrupt and are forced to

seek employment in the city A global food shortage begins Impacts on other industries as well (ie,

transportation)

6. High import duties After WWI, most countries wanted to

protect their industries and workers Therefore, gov’ts put into place high

import duties on other country’s goods. In reality, these high tarifs have a

negative impact on the economy Countries that need certain products

cannot buy them, and the industries that were producing a surplus of products cannot sell them.

7. Government inaction

Most gov’ts did not want to interfere in the economic affairs of the stock market

This lack of economic and social assistance prolonged the Depression

PM Mackenzie King, for example, believed that the Depression was a temporary situation and that it could resolve itself quickly.