The Great Depression

1929
•America was at the height of prosperity.
•Higher wages, more free time, & new inventions led to consumer society.
All that changed in 1929.
The Great Depression not only affected the US, but Europe as well.

Causes of the G.D.
Stock Market Crash of 1929- October
Bank failures
People stopped buying things
Smoot-Hawley Tariff & the American Economic Policy
Drought (not a cause but a major event during the Depression era)

Background to the Stock Market
With more money to spend people invested on the stock market.
President Hoover’s aim: “a chicken in every pot and two cars in every garage”.
BUT
50% of American families earned less than $2000 a year
American Industry was producing too many goods

Businesses & Stocks
Companies borrow money to pay for equipment or staff
To make more money, they can sell stocks, or shares in their company
Investors get a share of the profit the company makes
‘Shareholders’ can sell their shares on the stock market.
Prices can change every day according to how well the company is doing.
Prices can also change no matter how the company is doing
this is called Speculation
American industry booms, price of stocks go up
People see the stock market as a way to make easy money
Banks use your money to buy shares in companies
Investors sell their shares at higher prices and make huge profits
More people invest, pushing prices higher
People buy “on the margin” – you borrow $$ from a broker to buy stocks. When they pay off, both of you get $$

Timeline of the Crash
Sat 19th Oct - 3.5 million shares sold. Prices fall
Sun 20th Oct - “Stocks driven down as wave of selling engulfs market”
Mon. 21st Oct - Over 6 million shares change hands. Prices fall then rise in the afternoon. There are still buyers on the market
Tue 22nd Oct - Prices begin to rise
Wed 23rd Oct
3 million shares sold in the last hour of trading
OCTOBER 24 - Black Thursday
Morning: Stock prices begin to fall, & people get desperate – try to sell their stocks
Brokers start to panic – refuse to buy on margin
Almost 13 million stocks sold
Noon: 2 exchanges had shut down, 11 had committed suicide
A meeting of bankers was held @ J.P. Morgan
Richard Whitney, v.p. of the Stock Exchange, went onto the floor & started buying high.
Others followed suit, & the market recovered

….for now
Oct 25-28 – the market begins to recover
Trading remains pretty heavy, prices stay steady
Many investors were still nervous
Black MOnday
The market opens with a flood of selling
There wasn’t the support of bankers like there had been on the 24th
Over 9 million shares sold
New York Stock Exchange value dropped 10 million in 1 day