CAUSES OF THE GREAT DEPRESSION

Election of 1928

Hebert Hoover wins in a landslide.

Economic danger signs

UNEVEN PROSPERITY

$10,000 +1%

$5,000 - $9,9995%

$2,000-$4,99929%

$1,999 and under65%

Income Distribution, 1929

BUYING ON CREDIT

Economic danger signs

Installment plans – consumers could buy high cost items, and only pay a small down payment. They would pay the rest in monthly installments.

Charge plates – The first credit cards.

Economic danger signs

PLAYING THE

STOCK MARKET

The Long Bull Market

Stock Market – a system for buying and selling shares of companies.

Bull Market – a period of rising stock prices.

By 1929, 3-4 million Americans (almost 10% of the population) owned stocks.

Buying on margin – investors could buy stock for as little as 10% of the price and borrow the rest.

Speculation – making high-risk/high reward investments.

The value of all stocks went from $27 billion in 1925, to $87 billion by October 1929.

TOO MANY GOODS, TOO

LITTLE DEMAND

Economic danger signs

Overproduction– assembly lines turned out products faster than people could buy them.

Example: when radio sales slumped, makers cut back on orders for copper wire, wood cabinets, and glass radio tubes. Montana copper miners, Minnesota lumberjacks, and Ohio glassworkers lost their jobs. Jobless workers had to cut back purchases, further reducing sales.

TROUBLE FOR FARMERS AND

WORKERS

Economic danger signs

Farmers:• Demand and prices dropped after

WWI.• They couldn’t pay installments on new

machinery or mortgages on land.• Over 6,000 rural banks went out of

business.Workers: • Companies grew

wealthy, but laborers worked long hours for low wages. (56 hours/week at 16 cents an hour)

The Stock Market Crash

Black Thursday – October 24th, 1929Brokers called in loans. Investors began to sell.

Example: General Electric stock went from $400/share to $283 overnight.

Black Tuesday – October 29, 192916.4 million shares were sold compared to an average day of 4-8 million. Stocks lost $10-$15 billion in value in a single day.

Banks Fail