The Stock Market Crash

Ch. 21

From Boom to Bust

Bank Runs Loss of customer savings

Installment Plans Customer loans

Stock Margins Buying on margin Using stock to buy more stock-collateral

Speculation Risky business loans

Overproduction Businesses did not have money to pay for production. Caused unemployment

Contracting Economy

An economic decline marked by a falling output of goods and services.

Any contraction over a long period of time is called a depression.

Cotton went from .19 cents to 6.5 cents a bushel

12 million unemployed (25% of workforce) GNP fell from $103 billion in 1929 to $56

billion in 1933.

Impact of Depression

War reparations repaid by Allies to US were financed by Germany.

US had implemented the Dawes plan to see German repayment of war reparations and US industries invested heavily with Germany.

As investments by the US companies in Germany fell this caused Germany unable to repay war reparations to Allies, who in turn could not repay war loans to America.

Industrial production fell by 40% in Germany, 29% in France and 14% in Great Britain.

Impact of Depression

Hoovervilles Homes built in cities out of tar paper, metal and paper for

unemployed and homeless Americans. The Dust Bowl

Farming practices and wind storms (black blizzards) caused distress among Midwest farm owners.

Penny Auctions Farmers bought neighbors farms for mere pennies and

returned them to original owners Twenty-first Amendment

Repel of prohibition in 1933, eight states continued the practice. (dry counties)