TSWU. Discover how the pattern of conspicuous consumption in the 1920s led America into the Great Depression. Click the mouse button or press the Space Bar to display the answer. The Postwar Economic Boom. Years following WWI known as “Roaring 20’s”
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Discover how the pattern of conspicuous consumption in the 1920s led America into the Great Depression
Click the mouse button or press the Space Bar to display the answer.
The stock market crash
DID NOT CAUSE THE GREAT DEPRESSION
it was one of many complex factors.
1) Republican economic policies.
2) Unchecked stock speculation combined with unregulated banking.
3) Overproduction of goods.
4) The decline of the farming industry.
5) Unequal distribution of wealth.
6) The collapse of the stock market system.
“The business of America is business.” Calvin Coolidge
Real Estate Speculation
Many bought land sight unseen, which made scams inevitable.
Stock Market Speculation
Leads to this
Richest 2 %
Middle Class5 %
Poor & Poverty
Buying on Margin
1. Small % down payment for stock / bond, then the rest on credit
2. i.e.: $100.00
a. 10% down for purchase (Cash)
b. 90% credit (Margin)
* Repay the margin when you cashed in on the stok (95-98% returns)
3. Allowed almost everyone to participate—Bull Market
1. Economy begins to “overheat”; govt. slowly raises the interest rate to lower the circulation of liquid cash
2. Stock Market analyst Roger Babson warned of a “crash coming, which is going to be immense”
3. Buyers in the market become worried, and buy few stocks = lower points = lower prices = concern b/c this means they are not getting the return they hoped for.
4. October 24, 1929—Black Thursday
a. Nervous…buyers begin to sell
b. By the end of the day the market has dropped 31 points
c. Friday, Oct 25; the market levels off, and investors are ok, but still anxious
d. Monday, Oct 28; the market looses 11points
Bank loans broker
money at x% interest
Broker loans you money
at x% + y% interest
You pay broker back;
Broker makes $$
Broker pays bank back;
Bank makes $$
October 29, 1929-Black Tuesday
- After three days of stagnant growth, the market plummets 49 points
- People panic, begin to sell all of their stock…but there is a problem
a. As prices fall, lenders begin to collect on their margins; but when lendee’s try to sell, they are not able to collect as much of a return/loss
b. When they cannot collect the full return of their bond / stock they cannot pay the full margin back to the lender
iii. When all is said and done on Tues—15 million shares “dumped”
1. Customers were beginning to default on loans / Banks loose liquid assets
2. When word that lenders are not getting their money back, they go w/d
i. All at once means the bank cannot give you your money / banks begin to close
3. People across the nation hear that banks are closing…
4. By the Spring of 1930, over 25%of banks have been forced to close
5. Domino Effect of the banking system