1929-1932

The Great Depression Begins

Chain Reaction of Economic Failures

2. SpeculationBuyers made risky stock purchases without regard to a company’s earnings and profits. People were betting on

the bull market

1. Bull MarketEnticed buyers to buy on margin and pushed prices up

without regard to value

Chain Reaction of Economic Failures

4. Bank RunsSpeculators could not repay loans to banks. Banks did not

have cash reserves to fulfill the withdrawal demands. People panic and rush the banks for their money

3. Stock Market CrashOnce professional investors sensed stocks were overpriced

and began selling, panic selling and margin calls began. Then stock prices dropped

Chain Reaction of Economic Failures

6. Installment DebtPeople bought expensive goods on installment

plans. Paying off installments forced buyers to stop buying new things

5. Bank FailuresBanks failed when they could not fill withdrawal demands. News of the failure cause other runs and

more bank failures

Chain Reaction of Economic Failures

8. HobosSome people were so poor they became homeless.

Men took to “riding the rails,” traveling, and performing odd jobs

7. Mass LayoffsConsumption fell as workers lost jobs -> Manufacturing slows down -> business failures ->

layoffs