Optimistic mood where

everything seemed finePeople put savings into stock market hoping to

get rich

It was a Bull market

NOT a bear market

1925 - market value of all

stocks = $27 billion

Oct. 1929 - stock values hit $87 billion

NY Stock Exchange crashed

Thursday, Oct. 24, 1929

Monday Oct. 28, 1929Market opens with investors

& brokers poised to sell. Everyone is

nervous.

Tuesday, Oct. 29, 1929

“The most devastating day in the history of

markets”

AKA: Black

Tuesday

Prices fell so much that ALL

gains from previous year

were lostPublic

confidence was shattered

$30 Billion in stock disappeared

$150 Million in Margin Calls were made

I’ll explain this in

a minute

1.Speculation:

Buying stocks you think may

rise in price then quickly selling them for profit.

Buying on MarginInvestor pays fraction

of price (5%) & borrows the rest from broker.

The stocks are held as collateral.

2.

Calling in Margins:

3.

Investors are asked to repay the loan broker

gave them to buy stock

Margin calls were made when stock prices went

down People didn’t have $$$ to pay

for their stocks!

Brokers forced to sell (stocks had no value)

FYI: Banks could invest savings $$$ in the market!

Other investors

panicked & sold

The crash affected people who were not

even investors!

But savings deposits were not insured by gov’t so they

were lost as well

The Depression raged throughout the 1930s

At 1st economists predicted

quick recovery

Depression: Period of severely reduced economic activity characterized by

rise in unemployment

1.Overproduction

Industry made more goods than most

consumers wanted or

could afford

2.Unequal distribution

of wealth:Company profits rose in 1920s but wages were

NOT increased as much Lack of

purchasing power

The rich got richer & the poor got poorer

Most $ in hands of few who saved rather than

bought

Overproduction

No purchasing power+

3.

Overextension of credit: Too much

installment buying

4.

Economic troubles abroad

When people put borrowed money into market, bank funds for loans to Europe dried up

Highest tariff ever

Hawley-Smoot Tariff1930

Other countries raised tariffs as well & world

trade fell over 40%

Europe buys less U.S. goods

+ Hawley-Smoot Tariff

Less $$$ going to Europe

Tax policies of Andrew Mellon: Rich people & corporations

were not paying as

much income tax

5.

6. Fear: Panic swept due to

market crash

7. Overspeculation:You buy stocks you

THINKTHINK will rise in priceBased on

borrowed $$$ & optimism… NOT real value

8. Government PoliciesThere was not enough

$$$ in circulation to help economy

recover after the market crashed

Create a graphic organizer with 8

visuals that clearly charts AND explains the 8 causes of the Great Depression