Today

1. Today • I want you to understands the causes Great Depression and the causes of the crash of 1929. • We are going to list and explain 14 causes of the Great Depression. You will also need these for a later assignment.

4. Causes of the Great Depression n

5. How did it happen? • 1. False Prosperity –there was overproduction in most goods, 60% of US population lived below poverty line, 5% of Americans earned 33% of all wages. • 2. Speculation – Easy credit made many Americans players in the stock market. It made for a false sense of security. • 3. Banking Crisis – 9000 banks closed in 1930, most Americans lost their faith in the banking system, adding to the problem. • 4. Unemployment – as high as 38% nationally…some cities experienced unemp. As high as 80% . • 5. Trade Collapse —Hawley-Smoot Tariff was at an all time high, foreign countries responded accordingly. • 6. The Stock market Crash —caused people to lose faith in “the system.” • 7. Hoarding money —further added to the Banks problems, and in turn hurt the economy. • 8. Government Policies- Hoover did not believe in direct aid to the people. (think of our recent stimulus checks)

6. 9. The “Debt Problem.” – income and prices fell by as much as 25%. Americans carried a great deal of debt—which led to decreased spending. • 10. Ending the Gold Standard – at one time for every dollar in circulation, there was a dollar of gold in federal reserve. creating more money that wasn’t backed dollar for dollar caused inflation. • 11. Uneven distribution of wealth.- The top 0.1% of Americans had income equal to that of the bottom 42%. That same 0.1% controlled 35% of savings, while 80% of Americans had no savings at all. In 1928 Henry Ford reported an income of $14 million, while the average income was $750. • 12. To much reliance on the rich- the economy was dependant on the luxury spending of the rich, when the economy looked like it was turning for the worse, the rich not spending furthered the problem. • 13. Dependence on construction – the 20’s saw a lot of roads being built for the new autos…once it cooled…. • 14. Large scale international debt —American banks and the American Gov. loaned billions to foreign countries before and during the great War—paying it back would further hurt their countries.

7. Please Graph the Causes of the Depression

8. The Great Depression in the City and the Country

13. Today • In understanding the Great Crash, we need to first understand stocks. • What is a stock? • A stock represent a share in the ownership of a company. If you own a company's stock, then you are a owner, or shareholder, of the company. A stock represents a claim on the company's assets and profits. • In general, stocks reflect the long-term earnings potential of companies …Coke…Nike…IBM

14. How the “Game” works • Investors are attracted to stocks of companies they expect will earn large profits in the future; because many people wish to buy stocks of such companies, prices of these stocks tend to rise. On the other hand, investors are reluctant to purchase stocks of companies that face poor earnings prospects; because fewer people wish to buy and more wish to sell these stocks, prices fall.

15. Today • We will be going to the library to research our current economy as compared to the causes of the Great Depression. • You can use any means the internet will give you, but ask.com will be your best bet. • You may need to rephrase questions to get to answers that you may need. • Be very specific.. don’t ask “What is our unemployment rate?” but do ask “What is the Unemployment rate in the United States?”

16. Day One sample: Without borrowing Name of Stock Sold No. of Shares Margin Loan Total Cost Cash Price Name of Stock Bought No. of Shares Cash held Total Cost Price Paid For Gen. Motor $10 100 $1000 $0.00 Cash $1000 Borrowed 0 Total Held at End of day Borrowed on Margin Cash on Hand No. of Shares Price General Motor $10 100 You did not borrow You spent All that You had

17. Day One Sample: with borrowing on the Margin Name of Stock Sold No. of Shares Margin Loan Total Cost Cash Price Name of Stock Bought No. of Shares Cash held Total Cost Price Paid For Gen. Motor $10 1000 $10000 $0.00 Cash $1000 Borrowed $9,000 Total 10000 Held at End of day Borrowed on Margin Cash on Hand No. of Shares Price Gen Motor $10 $1000 You borrowed $9000 $0.00

18. American Can Amer. Tele & Telegraph General Electric General Motor US. Steel RCA 34 ¾ 114 3/4 139 ¼ 10 84 ¼ 2 ½ Day 1

19. AC AT&T GE GM USS RCA 73 ¼ 123 182 ½ 14 ¾ 106 3/4 6 ¼ Day 2

20. AC AT&T GE GM USS RCA 104 ¼ 125 1/2 196 ½ 15 94 ½ 4 ¾ Day 3

21. AC AT&T GE GM USS RCA 160 130 ½ 320 65 1/2 122 3/4 66 3/4 Day 4

22. AC AT&T GE GM RCA USS 292 ½ 142 1/2 326 117 ½ 126 77 3/4* *Stock Split. Add one share for each 5 shares of old stock Day 5

23. AC AT&T GE GM USS RCA 49* 149 1/2 83 3/4 ** 153 ¾ 157 1/4 61 1/2 * four for one split plus two-one old share becomes six **Four for on split-one old share becomes four. Day 6

24. Amer. Can AT&T GE GM USS RCA 75 178 1/2 135 ¾ 138 151 3/4 101 Day 7

25. Amer. Can AT&T GE GM USS RCA 110 1/4 193 221 ½ 203 ¾ 151 ¼ 420 Day 8

26. AC AT&T GE GM USS RCA 181 335 396 ¼ 181 279 101* *5 for one stock split-one old share becomes Five Day 9

27. AC AT&T GE GM USS RCA **Today is also known as the Great Stock Market Crash 86 197 ¼ 168 36 150 28 Day 10