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Prosperity Shattered

Prosperity Shattered. Chapter 15 Section 1. Economic Troubles on the Horizon. Warnings that the econ was in trouble included: (see pg 442-443) Ag. Crisis “sick” industries Consumer reliance on credit Interest rates were low to promote business Bought things, but had no money to pay.

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Prosperity Shattered

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  1. Prosperity Shattered Chapter 15 Section 1

  2. Economic Troubles on the Horizon • Warnings that the econ was in trouble included: (see pg 442-443) • Ag. Crisis • “sick” industries • Consumer reliance on credit • Interest rates were low to promote business • Bought things, but had no money to pay

  3. Stock speculation • Bull market-market w/ an upward trend in stock prices • Rapid buying & selling of stock to make a quick profit • Problem: inflated the prices to stock (pay more than actually worth-depends a lot on consumer confidence- if it falls, so does the price) • Bought stocks w/ borrowed money called margin buying (if price falls, then deep debt)

  4. Summary • Describe why the business practices concerned economic experts during the 1920s.

  5. Stock Market Crashes • Black Thursday- Oct. 24, 1929-stock market crashes • Many investors sell stock • Nervous about rising interest rates • Caused investor confidence to fall therefore prices

  6. Black Tuesday-Oct. 29, 1929-stock prices sink even more • Brokers contact customers that had bought stock on the margin-can’t repay $ so have to sell stock at a huge loss • Thought it was only temporary setback • Few people had invested-however still helped caused severe depression

  7. Summary • What factors led to the crash of the stock market?

  8. Banking Crisis • People could not make their loan payments • Little income for banks-why is this bad? (see pg 444) • Forced to close • Customers would lose savings if the banks closed • Withdrew $-more banks close

  9. Business Failures • Consumers stop buying goods- especially on credit • Layoff workers=high unemployment • Scale back production

  10. YES-NO-WHY • The Great Depression would not have happened if the stock market would not have crashed.

  11. Global Depression • Massive debt from WWI slowed world trade • Am. companies relied on foreigners to buy-w/o led to massive surplus • US placed high tariffs on imported goods • Smoot-Hawley Tariff- highest in US history meant to protect Am. industry from inexpensive imports • Helped world depression by eliminating US market

  12. Global Depression Cont. • Income gap-rich got richer, poor got poorer • Poor bought on credit-no money meant they couldn’t spark production • Interest rate got higher-couldn’t pay debts

  13. Business Cycle • Draw a picture of the business cycle. See page 447 for a description of the business cycle.

  14. What caused the Great Depression? • Stock market crash • Margin buying • Stock speculation • Bank Failures • Consumer reliance on credit • Business Failures • Global economic crisis • Unequal distribution of wealth

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