1. Chapter 24 THE GREAT DEPRESSION
Section 1: Prosperity Shattered

2. Objectives:
We know that economic hardships had a very disruptive (catastrophic) influence on American families…. We will learn…
Why did financial experts issue warnings about business practices during the 1920s?
Why did the stock market crash in 1929?
How did the banking crisis and resulting business failures signal the beginning of the Great Depression?
What were the main causes of the Great Depression?

3. Warnings About Business Practices: Trends in the roaring Twenties that would weaken the American economy
farm crisis-After World War I, farm prices plummeted farmers were swallowed by debt
“sick” industries-
Coal, textiles, other old industries suffer downturns.
consumers’ reliance on credit- purchasing today's life with tomorrows money
Debts would limit the future ability to purchase goods
stock speculation- buying any stock with the hope of selling at a profit. Buying on margin especially risky!

4. Reasons for the stock market crash of 1929: Step 2
Primary market forces: Fear and greed
Buy stocks to make profit (greed) and sell stocks to avoid a loss of money (fear)
Investors began to be afraid of economic factors such as rising interest rates and growing inventories (fear).
Investors sold stocks. As the amount of stocks for sale increased, the price plummeted
Stock prices dropped sharply, fueling panic.
Heavy selling continued. Many stocks became worthless

5. What is the stock market?
The stock market is where investors go to buy a piece of a company (called a share) with the hope that someone else will be willing to pay you more money for that share at some future date. It is not uncommon for a company to have millions of shares sold to investors.
Businesses use this money to strengthen their business (new equipment, hire new people, etc…)
The price of a share of a company will increase as more people go to the market to buy shares.
A strong growing business will attract more investment that a weak, failing business
Speculators buy shares based on the behavior of the stock market rather than the strength of the business of which it buys shares

6. A Banking Crisis Paralyzes the American Economy: Step 3
The stock market led to a collapse of the banking system.
Stock speculators borrowed money to buy stocks. They might pay 10% of the stock’s price and borrow the rest. The stock served as collateral.
As price of the collateral goes down, the bank asked for its money back. Stock holders tried to sell their stocks back. Their rush to sell drives down prices of the stock.
Many can not pay back the bank due to falling prices. Bank depositors panic that the bank might fail because so many loans are not being paid back.
Depositors rush to get their money, banks eventually go bankrupt and shut their doors.
This would effect most every American.
Businesses had no sources of capital and no market to sell goods and no reason to hire workers
Consumers had no way to purchase goods without jobs and savings

7. Causes of the Great Depression
The global economic crisis decreased exports.
Unequal distribution of income reduced the total purchasing power available in the economy. Too many people unable to purchase goods
Consumer debt increased economic chaos.

8. Why were these pictures taken
Why were these pictures taken? What do they tell us about the time they were taken?
Are these pictures primary or secondary sources from the 1930’s?
What questions do these pictures generate for us as history students?

9. Cause and Effect Chain of the Great Depression
Economic weaknesses of 1920’s
The stock market crashes in October 1929
Debtors default on loans and a banking crisis results
The crisis snowballed into a deep and world-wide economic depression
Millions lost their ability to purchase goods and services