Stock Market Crash and Great Depression

Despite all the economic growth of the 1920s all of that economic growth happening all at once left the economy very vulnerable with only one place really left to go and that was down this leads to the great depression our next topic of study many unsafe business practices contributed to the onset of the great depression overproduction and under consumption comes

First if you produce something at such a rate that you create a massive supply of and demand has not kept up with that supply then you will receive less and less money for that and if it’s too bad you’ll end up going out of business because you’re not earning enough money to pay for the product that you’re producing efficiency produced in the assembly line is

Really one of the big reasons some businesses were producing goods at a rate that was really too much so that their prices dropped to the point of them going out of business too much credit also banks are not only giving out money for homes automobiles household appliances and such they’re also giving out money to help people invest in the stock market and this is

Very dangerous if you buy stocks on margin which is really just doing so with borrowed money and then that stock’s price decreases and you can’t pay back your debt not only you but the financial institution that lent you the money are in very rough shape at this point so this is one of the things that made the stock market crash spiral out of control and turn into a

Great depression today when the stock market takes a big hit it definitely negatively impacts the economy but the protections put in place during the great depression allow for it to not turn into another depression due to the fact that there were loans being given to invest in the stock market that’s not allowed anymore today here’s a basic supply and demand curve

If supply is really really high and demand is really really low you will get a very very low price for your product and you will probably end up going out of business if you keep supply at a steady rate then you can make a decent living this basic supply and demand curve is how a capital the store free market economy works we mentioned before overproduction that

Would create such a drastically large supply that demand really wouldn’t be able to keep up with it and that is one of the things that exacerbated the stock market crash and turned it into a great depression president calvin coolidge decides not to run for re-election in 1928 his successor another republican is herbert hoover throughout early nineteen twenty nine

Businesses are growing as normal and the economy is growing stock prices are peaking at record highs in september 1929 i’ll show you this on a chart in a moment but as prices begin to go down a little bit people begin to sell because they don’t want to lose profit on october 29th 1929 known as black tuesday a record 16 and a half million shares of stocks are sold

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Off often far below what people had paid for the stocks originally the entire system crashes as a result the buying on margin causes this crash to spiral out of control the people who had bought the stock cannot pay back their loans and the financial institutions that had given the loans ran out of money here is a chart showing the growth of the late 1920s that

Reaches a peak in september 1929 and then black tuesday is this sharp drop right here that only continues to get worse as october 1929 closes slight rebounds only led to more drop-offs more drop-offs more drop-offs to a point where it is this point right here in 1932 where the market low has reached the market bottomed doubt and the depths of the great depression

Were at their worst in the early 1930s the repercussions were that the millions of investors that had borrowed on margin lost their life savings businesses that had been borrowing on margin to expand their business to try to make more money they go bankrupt and worst of all people lose confidence in the economy and begin saving their money rather than spending

It this spells doom for an economy dependent on consumer spending worldwide trade and banking came to a halt almost as fast as it had within the us the us government lent germany and two and a half billion dollars every year so that they could afford to run their government and pay their war reparations to britain and france it’s really these war reparations that

Are most important to germany keeping up with in turn britain and france owed the us money from loans that the u.s. had given them during world war one their average yearly payment is 2.6 billion if you do that basic math in this system the u.s. profits five hundred million dollars yearly on top of getting previous loans paid back to them so the u.s. is making

Out pretty good in this system and when this comes to a grinding halt not only do these european countries suffer but the united states suffers here’s a chart showing how the united states would send the two and a half billion in loans to germany only to be paid in war reparation payments to the allied powers of britain and france who then turned around and paid

Back the united states for money they had borrowed during world war one and the u.s. ends up making a pretty healthy profit from this when the u.s. could no longer afford to prop up the german economy it collapsed germany is an absolute shambles in turn when britain and france are not receiving war reparations their economies collapse you can see that the stock

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Market crash caused a domino effect of economic collapses worldwide if you look at this photograph there is a german citizen literally burning large amounts of currency because it was worth more heating their home than it was spending it the holly smoot tariff in 1930 this was an attempt to try to fix things but it only made things worse as had always been logical

Business practice congress raised tariffs on foreign goods to protect american products in the marketplace this is just basic logic if we raise tariffs on foreign products it will make our people purchase american products and it will help the american economy however european nations do the same exact thing eventually international trade literally stops because

All of these countries have placed tariffs against each other to the point where it’s not worth trying to trade overseas anymore even today those who oppose protective tariffs and promote free trade agreements point to the negative effects of the holly smoot tariff as one of the reasons the great depression got some worse as time went on president hoover throughout

1930 and 1931 tried to do many things to help alleviate the suffering of the great depression he cut taxes he thought this would allow consumers to buy more products but many of these consumers don’t even have a job anymore because of the economic collapse so there’s really not a whole lot of tax money coming in to begin with because people aren’t even working at

All public works hoover greatly increases the government spending on the building of things like dams highways harbors and other public projects to put the people back to work bailouts hoover persuaded congress to give federal funds to banks railroads insurance companies all these various businesses to prevent massive bankruptcies the federal farm board access

Farm goods are being bought up to keep farmers from going bankrupt and to keep prices from falling to the point where agriculture would collapse a debt moratorium in 1931 hoover told european nations that they could temporarily delay payments of debt to the united states and likewise the us would not be paying its debts to other countries so really nations just

Stopped exchanging debt payments to each other the reconstruction finance corporation this is another thing that expanded the government’s role in giving relief to businesses particularly banks and also increased spending on public work to get people back to work and this is done throughout 1932 none of these things seemed to be able to keep up with the downward

Spiral of the great depression it seems that no matter what hoover did it didn’t work the damage that the risky business practices had created was too much and he was doing too little to try to combat it it is his failure to help citizens directly that made it seem that all he cared about was helping businesses and not the average person and that is wording that

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You will see on the regents exam quite often is that it is his failure to help citizens directly again i will repeat this it is his inability to help citizens directly that made it seem that all he cared about was rich people and businesses here’s a figure showing what little impact hoover’s policies were having because here’s the cutoff where he loses in 1932 to

Franklin roosevelt you could see the gap here the unemployment rate is seemingly untouched by hoover’s policies it isn’t until fdr comes into office and initiates the new deal that you see large gains in the number of workers being put back to work by new deal programs the bonus army in 1932 approximately 17,000 unemployed veterans of world war one wanted future

Bonuses given to them early to help them through the great depression essentially they’re saying instead of waiting to give us this money give it to us now and it will help us get back on her feet and it will therefore help the overall situation of the great depression two writers for the new republic magazine offered a ride to two of these soldiers on their way

To a protest rally in washington dc they wrote down their conversations with the two men and published them in their magazine for the rest of the country to hear this was a pretty dark stain on the hoover administration here is one of these protests hoovervilles this is a very famous term developed during the great depression because herbert hoover was seen as

To blame for the severity of the depression nobody necessarily blamed him for the stock market crash but they did blame him for not doing enough again i’ll use the terms to directly help the citizens it seemed that all he was doing was helping businesses try to get back on their feet the dust bowl you can see in these two horrible photographs and this map with a

Coloration of where the dust bowl had its worst impacts this was awful for farmers in the midwest the book the grapes of wrath is based on farmers from oklahoma whose land was ravaged by the dust bowl literally just leaving their land and going to california hoping to find work in the vineyards growing grapes in california quite a tragic story this is the end of

The presentation please make sure after taking your notes that you complete the online quiz use your notes if you use your notes there’s really no reason why you shouldn’t get a perfect score thank you see you in class

Transcribed from video
Stock Market Crash and Great Depression By Tim Baker