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Objectives: Examine the causes and effects of the crash

Objectives: Examine the causes and effects of the crash. Do Now: List things you know about the current economic issues in the United States. Causes of the Depression. An introduction to the decade. Many causes contributed including. Stock Market Speculation Poor FED policies Tariffs

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Objectives: Examine the causes and effects of the crash

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  1. Objectives: Examine the causes and effects of the crash Do Now: List things you know about the current economic issues in the United States.

  2. Causes of the Depression An introduction to the decade

  3. Many causes contributed including • Stock Market Speculation • Poor FED policies • Tariffs • Misdistribution of Wealth • Farming Problems • Overproduction

  4. …to Bust

  5. Case 1 Charles Ponzi—Used investments to dupe investors into believing they were making money while pocketing most of it 1919– Promised $15 return on $10 loans over a 90 day period Said he would buy foreign currency at low price and sell it at high People gladly invested Ponzi collected 1million a week Collected 15 million in 8 months and only returned 200,000. “Ponzi Scheme” Case 2 Florida land speculation Investment in “The Sunshine State” Land offered at 10% down Often far inland from beach Swampland Hurricanes in 1926 Prices skyrocketed 143 million in1925 = 1 billion in 1928 Endless Riches!!!

  6. Case 3 • Stock Market investment • Throughout 1920s a steady increase • 1928 and 1929 investment soared

  7. Results • Causes • 10% margin ---Why? • Investors promised riches • Others were inspired by success • March 3 to September 3 1928 • Westinghouse—91.6 to 313 • AT&T 179 to 335 • 1.5 million Americans had invested

  8. October 24th (Thursday) stocks plunged Bankers meet at J.P. Morgan and agree to invest to increase confidence Sep. 24, 2008, Guardian reports,“Markets boosted as Warren Buffett invests $5bn in Goldman Sachs” Investors still panicked Rumors of speculators committing suicide and govt. troops surrounding exchange to protect investors Hoover states, “fundamental business of the country…is on a sound and prosperous basis.” Bush states, "I say that the fundamentals of our nation's economy are strong.” on Sep. 30, 2007` Friday- Steady On Monday key stocks tumbled At opening bell on “Black Tuesday,” October 29, 1929 Sell! Sell! Sell! By 1932 stocks were valued at 12% of what they had been in 1929 Stock statistics “Black” Days

  9. Not quite as dramatic but…

  10. Miami Familiar Patterns

  11. Federal Reserve Board Raised Interest Rates in 1930 and 1931 Why? To prevent further investment Results– Disastrous International Loans Personal Loans Bank Loans December 17th, 2008 “Fed cuts key interest rate to record low: zero to 0.25%” L.A. Times Rate Cut Video Poor FED policies

  12. Keynesian Theory When recession– Government should find a way to revitalize the economy This is what FDR tried to do John Maynard Keynes (Canes)

  13. Hawley-Smoot Tariff Act • Throughout the 20s farmers looked to boost the demand for domestic farm-goods. • The 1930 Tariff Act (Hawley-Smoot) increased taxes on 75 different imported goods by 40% • Also placed Tariffs on 925 manufactured products. • Results– You should have this down by now…so???

  14. The 1920s led to a widening gap between the rich and the poor If wealth would have been distributed more evenly, the depression may not have been so deep or lengthy A growing share of the income pie, plus decreasing tax rates to boot. Not a bad deal. Unfortunately, it's a deal that's enjoyed by just 1% of the richest Americans. That hallowed group enjoyed 22% of the nation's adjusted gross income in 2006, and saw its average tax rate drop to an 18-year low. That's the latest from the IRS' income statistics division. Wall Street Journal Misdistribution of Wealth

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