Text Chapter 31.2

Financial Collapse and Depression

U.S. production

and investment

in the 1920’s

fueled the

world’s economy

By 1929

American

factories

produced ½ of

the world’s

industrial goods.

Fundamental Flaws of the U.S. EconomyUneven distribution

of wealth (60% of American families earned less than $2K per year).

Farm Overproduction: Better production methods and competition from non-U.S. farmers drive crop prices down.

Stock Speculation

U.S. Stock Market CrashesDespite econ.

problems, people continued to buy stocks on margin

September, 1929—Some savvy investors realize stocks are inflated and begin to sell

Panic! Market crashes by October, 1929

After the Crash:Unemployment rises

Production decreases

Wages Decline

Banks Close (taking investor’s money with them)

Businesses Fail

Farmers lose their land

U.S. Depression Spreads

Americans demand repayment of European loans

Further loans ceaseCongress places

tariffs on European goods, so demand for them declines.

Other nations respond by raising tariffs

World trade drops 65%

Result?