TodayToday

I want you to understands the I want you to understands the causescauses Great Depression and the Great Depression and the causescauses of of the crash of 1929.the crash of 1929.

We are going to list and explain 14 We are going to list and explain 14 causes of the Great Depression. You causes of the Great Depression. You will also need these for a later will also need these for a later assignment.assignment.

Causes of the Great DepressionCauses of the Great Depressionn

How did it happen?How did it happen? 1. 1. False ProsperityFalse Prosperity –there was overproduction in most goods, –there was overproduction in most goods,

60% of US population lived below poverty line, 5% of Americans 60% of US population lived below poverty line, 5% of Americans earned 33% of all wages.earned 33% of all wages.

2. 2. SpeculationSpeculation – Easy credit made many Americans players in – Easy credit made many Americans players in the stock market. It made for a false sense of security.the stock market. It made for a false sense of security.

3. 3. Banking CrisisBanking Crisis – 9000 banks closed in 1930, most Americans – 9000 banks closed in 1930, most Americans lost their faith in the banking system, adding to the problem.lost their faith in the banking system, adding to the problem.

4. 4. UnemploymentUnemployment – as high as 38% nationally…some cities – as high as 38% nationally…some cities experienced unemp. As high as 80% .experienced unemp. As high as 80% .

5. 5. Trade CollapseTrade Collapse —Hawley-Smoot Tariff was at an all time high, —Hawley-Smoot Tariff was at an all time high, foreign countries responded accordingly.foreign countries responded accordingly.

6. 6. The Stock market CrashThe Stock market Crash —caused people to lose faith in “the —caused people to lose faith in “the system.” system.”

7. 7. Hoarding moneyHoarding money —further added to the Banks problems, and —further added to the Banks problems, and in turn hurt the economy.in turn hurt the economy.

8. 8. Government Policies-Government Policies- Hoover did not believe in direct aid to Hoover did not believe in direct aid to the people. (think of our recent stimulus checks)the people. (think of our recent stimulus checks)

9. 9. The “Debt ProblemThe “Debt Problem.” – income and prices fell by as much as .” – income and prices fell by as much as 25%. Americans carried a great deal of debt—which led to 25%. Americans carried a great deal of debt—which led to decreased spending.decreased spending.

10. 10. Ending the Gold StandardEnding the Gold Standard – at one time for every dollar in – at one time for every dollar in circulation, there was a dollar of gold in federal reserve. creating circulation, there was a dollar of gold in federal reserve. creating more money that wasn’t backed dollar for dollar caused inflation.more money that wasn’t backed dollar for dollar caused inflation.

11. 11. Uneven distribution of wealthUneven distribution of wealth.- The top 0.1% of .- The top 0.1% of Americans had income equal to that of the bottom 42%. That Americans had income equal to that of the bottom 42%. That same 0.1% controlled 35% of savings, while 80% of Americans same 0.1% controlled 35% of savings, while 80% of Americans had no savings at all. In 1928 Henry Ford reported an income of had no savings at all. In 1928 Henry Ford reported an income of $14 million, while the average income was $750.$14 million, while the average income was $750.

12. 12. To much reliance on the rich-To much reliance on the rich- the economy was dependant the economy was dependant on the luxury spending of the rich, when the economy looked like on the luxury spending of the rich, when the economy looked like it was turning for the worse, the rich not spending furthered the it was turning for the worse, the rich not spending furthered the problem.problem.

13. 13. Dependence on constructionDependence on construction – the 20’s saw a lot of roads – the 20’s saw a lot of roads being built for the new autos…once it cooled….being built for the new autos…once it cooled….

14. 14. Large scale international debtLarge scale international debt —American banks and the —American banks and the American Gov. loaned billions to foreign countries before and American Gov. loaned billions to foreign countries before and during the great War—paying it back would further hurt their during the great War—paying it back would further hurt their countries.countries.

Please Graph the Causes of the DepressionPlease Graph the Causes of the Depression

14

13

12

11

10

9

8

7

6

5

4

3

2

1

CausesOf The

Depression

The Great Depression in the City The Great Depression in the City and the Countryand the Country

Identify Rural and Urban Characteristics,And characteristics they shared.

Rural ExperiencesUrban Experiences

BusinessCycle

Banking Crisis

Global Depression

Consumer Debt

Income Gap

TheGreat

Depression

TodayToday In understanding the Great Crash, we need to first In understanding the Great Crash, we need to first

understand stocks.understand stocks.

What is a stock?What is a stock?     A A stockstock represent a share in the ownership of a company. represent a share in the ownership of a company.

If you own a company's stock, then you are a owner, or If you own a company's stock, then you are a owner, or shareholdershareholder, of the company. A stock represents a claim , of the company. A stock represents a claim on the company's assets and profits. on the company's assets and profits.

In general, stocks reflect the long-term earnings potential of In general, stocks reflect the long-term earnings potential of companies …Coke…Nike…IBMcompanies …Coke…Nike…IBM

How the “Game” worksHow the “Game” works

Investors are attracted to stocks of Investors are attracted to stocks of companies they expect will earn large companies they expect will earn large profits in the future; because many people profits in the future; because many people wish to buy stocks of such companies, wish to buy stocks of such companies, prices of these stocks tend to rise. On the prices of these stocks tend to rise. On the other hand, investors are reluctant to other hand, investors are reluctant to purchase stocks of companies that face purchase stocks of companies that face poor earnings prospects; because fewer poor earnings prospects; because fewer people wish to buy and more wish to sell people wish to buy and more wish to sell these stocks, prices fall. these stocks, prices fall.

TodayToday We will be going to the library to research We will be going to the library to research

our current economy as compared to the our current economy as compared to the causes of the Great Depression.causes of the Great Depression.

You can use any means the internet will You can use any means the internet will give you, but ask.com will be your best give you, but ask.com will be your best bet.bet.

You may need to rephrase questions to You may need to rephrase questions to get to answers that you may need.get to answers that you may need.

Be very specific.. don’t ask “What is our Be very specific.. don’t ask “What is our unemployment rate?” but do ask “What unemployment rate?” but do ask “What is the Unemployment rate in the United is the Unemployment rate in the United States?”States?”

Name of Stock Sold Price

No. of Shares

Total Cost

MarginLoan

Cash

Name ofStock Bought

PriceNo. ofShares

Total Cost

Paid For Cash held

Gen.Motor

$10 100 $1000 $0.00

Held atEnd ofday

Price No. ofShares

Borrowed on Margin Cash onHand

Cash$1000Borrowed 0Total

GeneralMotor

$10 100 You did not borrowYou spent

All thatYou had

Day One sample: Without borrowing

Name of Stock Sold Price

No. of Shares

Total Cost

MarginLoan

Cash

Name ofStock Bought

PriceNo. ofShares

Total Cost

Paid For Cash held

Gen.Motor

$10 1000 $10000 $0.00

Held atEnd ofday

Price No. ofShares

Borrowed on Margin Cash onHand

Cash$1000Borrowed $9,000Total 10000

GenMotor

$10 $1000 You borrowed $9000 $0.00

Day One Sample: with borrowing on the Margin

Day 1Day 1

American CanAmerican Can

Amer. Tele & Amer. Tele & TelegraphTelegraph

General ElectricGeneral Electric General MotorGeneral Motor US. SteelUS. Steel

RCA RCA

34 ¾34 ¾ 114 3/4114 3/4

139 ¼139 ¼ 1010 84 ¼84 ¼ 2 ½2 ½

Day 2Day 2

ACAC AT&TAT&T

GEGE GMGM USSUSS RCARCA

73 ¼73 ¼ 123123 182 ½182 ½ 14 ¾14 ¾ 106 3/4106 3/4 6 ¼6 ¼

Day 3Day 3

ACAC

AT&T AT&T

GE GE

GM GM

USSUSS RCARCA

104 ¼104 ¼ 125 1/2125 1/2 196 ½196 ½ 1515 94 ½94 ½ 4 ¾4 ¾

Day 4Day 4

AC AC

AT&T AT&T

GE GE

GMGM

USS USS

RCARCA

160160 130 ½130 ½ 320320 65 1/265 1/2 122 3/4122 3/4 66 3/466 3/4

Day 5Day 5

AC AC

AT&T AT&T

GE GE

GM GM

RCARCA USS USS

292 ½292 ½ 142 1/2142 1/2 326326 117 ½117 ½ 126126 77 3/4*77 3/4* *Stock Split. Add one *Stock Split. Add one

share for each 5 share for each 5 shares of old stockshares of old stock

Day 6Day 6

AC AC AT&T AT&T GE GE GM GM USS USS RCA RCA

49*49* 149 1/2149 1/2 83 3/4 **83 3/4 ** 153 ¾153 ¾ 157 1/4157 1/4 61 1/261 1/2

* four for one split plus two-* four for one split plus two-one old share becomes sixone old share becomes six

**Four for on split-one old **Four for on split-one old share becomes four.share becomes four.

Day 7Day 7

Amer. Can Amer. Can

AT&TAT&T GE GE GMGM USSUSS RCA RCA

7575 178 1/2178 1/2 135 ¾135 ¾ 138138 151 3/4151 3/4 101101

Day 8Day 8

Amer. CanAmer. Can AT&T AT&T GEGE GMGM USSUSS RCARCA

110 1/4110 1/4 193193 221 ½221 ½ 203 ¾203 ¾ 151 ¼151 ¼ 420420

Day 9Day 9

ACAC AT&TAT&T GEGE GMGM USSUSS RCA RCA

181 181 335 335 396 ¼396 ¼ 181 181 279 279 101*101*

**5 for one stock split-one old 5 for one stock split-one old share becomes Fiveshare becomes Five

Day 10Day 10

ACAC AT&TAT&T GE GE GM GM

USSUSS RCA RCA

**Today is also **Today is also

known as the Great known as the Great Stock Market CrashStock Market Crash

8686 197 ¼197 ¼ 168 168 3636 150150 2828