THE GREAT CRASH

Review – 5 Causes of the Depression!

1. The Gap Between the Rich and the Poor.2. Easy Credit Led to Larger Amounts of

Personal Debt.3. Unregulated Stock Speculation!4. Industrial Overproduction of Durable

Goods.5. Farmers Suffered First!

THE STOCK MARKET By 1929, many Americans

were invested in the Stock Market

The Stock Market had become the most visible symbol of a prosperous American economy

The Dow Jones Industrial Average was the barometer of the Stock Market’s worth

The Dow is a measure based on the price of 30 large firms

STOCK PRICES RISE THROUGH THE 1920s

Through most of the 1920s, stock prices rose steadily

The Dow reached a high in 1929 of 381 points (300 points higher than 1924)

By 1929, 4 million Americans owned stocks

New York Stock Exchange

The Great Crash

1928 – Dow Jones Industrial Average – the avg. price of stock for major industries hit 191.

Mar. 4, 1929 – Dow hit 313 Points!

Sept. 3, 1929 – All time high of 381 Points!

It fell gradually until Oct. 23, 1929 when it fell 21 Points in one hour.

Black Thursday, Oct. 24, 1929 orders to sell by worried investors caused it to plummet!

Black Tuesday, Oct. 29, 1929!

To stop panic, a group of bankers pooled $ to start buying again, but be Monday, Oct. 28th they were falling again.

Black Tuesday – a record 16.4 Million shares sold (compared to 6 Million on a average day)!

By November 13, the Dow had fallen to 198.7 (381 on Sept. 3rd).

GE had been $400/ share; now $283.

$30 Billion evaporated! At first only the 4

million Americans who owned stock were affected; soon millions more!

By mid-November, investors had lost about

$30 billion

THE 1929 CRASH

In September the Stock Market had some unusual up & down movements

On October 24, the market took a plunge . . .the worst was yet to come

On October 29, now known as Black Tuesday, the bottom fell out

16.4 million shares were sold that day – prices plummeted

People who had bought on margin (credit) were stuck with huge debts

THE GREAT DEPRESSION

The Stock Market crash signaled the beginning of the Great Depression

The Great Depression is generally defined as the period from 1929 – 1940 in which the economy plummeted and unemployment skyrocketed

The crash alone did not cause the Great Depression, but it hastened its arrival

Alabama family, 1938 Photo by Walter Evans

The Impact of the Crash on Workers, Farmers, & Businesses

Factories shut down leaving millions jobless! Ford left 75,000 out of work by Aug. 1931!

1932 –1 out of 4 Americans were unemployed!

Farm prices continued to fall. Wheat from $1.04 in 1929 to $0.38 in 1932; Cotton $0.17/ lb. To $0.065/ lb.

Business failures large and small put others out of work and slashed many incomes and hours of those able to keep their jobs.

FINANCIAL COLLAPSE After the crash,

many Americans panicked and withdrew their money from banks

Banks had invested in the Stock Market and lost money

In 1929- 600 banks fail

By 1933 – 11,000 of the 25,000 banks nationwide had collapsed

Bank run 1929, Los Angeles

The Impact on Banks

Bank failures went from rural to urban.

9 Million savings accounts vanished and runs on banks added to the problem!

1931 – 1500 banks ran out of money!

Federal Reserve – tightened the money supply – big mistake!

The Depression goes Worldwide

International banking, manufacturing, & trade had made the world interdependent by 1930.

France and Britain could not pay U.S. because Germany could no longer borrow from U.S. banks to pay reparations!

Republican Tariff Policy (Hawley-Smoot Tariff – 1930) restricted international trade.

GNP DROPS, UNEMPLOYMENT SOARS

Between 1928-1932, the U.S. Gross National Product (GNP) – the total output of a nation’s goods & services – fell nearly 50% from $104 billion to $59 billion

90,000 businesses went bankrupt

Unemployment leaped from 3% in 1929 to 25% in 1933

HAWLEY-SMOOT TARIFF

The U.S. was not the only country gripped by the Great Depression

Much of Europe suffered throughout the 1920s

In 1930, Congress passed the toughest tariff in U.S. history called the Hawley- Smoot Tariff

It was meant to protect U.S. industry yet had the opposite effect

Other countries enacted their own tariffs and soon world trade fell 40%

Exit Slip – The Crash

1. October 29, 1929 is known as “__________.”

2. T or F: Most businesses were hurt by the Great Crash.

3. T or F: Banks prospered after the crash because they were the only ones that had money.

4. This European nation suffered most during the Depression?A. Great Britain B. France C. Germany