BELLWORK. What are some characteristics/factors of a booming economy? (List 3!) What is a disadvantage of buying goods on credit? What were some advantages of assembly line production? How did the increase in automobiles lead to an increase in other industries?
BELLWORK What are some characteristics/factors of a booming economy? (List 3!) What is a disadvantage of buying goods on credit? What were some advantages of assembly line production? How did the increase in automobiles lead to an increase in other industries? THINKER: What could a country do to get out of an economic recession?
How stocks work Companies are made up of stocks Stocks (shares): small portions of the company that can be bought and sold for a given amount of money. When a company does well (makes a profit), the stock increases in value. When a company does poorly (loses money), the stocks decrease in value. The Stock Market: the place where stocks are bought and sold.
STOCK VOCABULARY Speculation - Making high risk investments with the hope of huge returns. “Have to bet big to win big” Buying on Margin – buy a portion of stock, and borrow the rest
THE CASE OF CIRCUIT CITY Opened in 1949 as a retailer of brand-name electronics, computers, and entertainment systems. Joined the stock market in 1984 – fairly successful 2003: eliminated commission sales, 4000 employees laid off As of 2005, Circuit City held $1 billion in investments 2007: Management Turnover, 3500 more jobs lost 2008: CEO resigned, closed 155 stores, laid off 17% of workers 11/10/08: filed for Bankruptcy, $2.32 billion in debt 1/16/09: announced they were going out of business – closing all U.S. stores
On this blank sheet of paper: Draw a roller coaster Make sure you leave room for notes and descriptions
Signs of an “unsound economy” Uneven Prosperity Tax cuts to wealthy Rich get richer & poor get poorer Personal Debt Luxury items seem affordable with credit Not everyone could pay it off Playing the Stock Market Speculation: high risk investments for a big return Buying on margin: bought portion of stock & borrowed the rest High interest rates Overproduction Originally high demand, but now, too much product Companies lost a lot of product and money
All these factors combined until October 29, 1929 when. . . . . . THE STOCK MARKET CRASHED!!!!
BLACK TUESDAY Inflated stock prices began to fall at a rapid rate. 16.4 million shares were immediately sold Sold at much lower prices than for what they were bought= huge financial losses for sellers. Sends economy into a downfall.
Make a prediction…….. Now that the STOCK MARKET has crashed… Think about what effects this event might have on: People buying goods People producing goods Employment
IMMEDIATE RESULTS #1 - Massive selling of stocks all sold for low prices. Many investors lost tons of money.
IMMEDIATE EFFECTS #2- Lack of Buying- People begin to worry about their money. Stop buying manufactured goods- try to hold onto what money they have left.
IMMEDIATE EFFECTS #3- Lack of production- With people not buying many goods, companies stop producing much. Economy begins to slow down greatly.
IMMEDIATE EFFECTS #4 Unemployment- Since people are not buying goods, people have to stop making goods Workers begin to lose their jobs. Many workers have no income.
In 1929, America’s population was 120 million, but only 4 million held stocks. If this was such a small number, how and why did EVERYONE become affected by the Great Crash?
Ripple Effect of the Crash The Great Crash spread to the rest of Americans through the combination of 4 factors: Risky loans hurt banks: business and consumer borrowing Cuts in production: output of goods dropped, no longer affordable Rise in unemployment Bank runs: fearful that banks would run out of money, people rushed to make withdrawals from their accounts. This eventually wiped out people’s savings and created bank failures.
These results of the Great Crash triggered the most severe economic downturn in history. The Great Depression: lasted from 1929 until the U.S. entered WWII in 1941.
Impact on Farmers and Workers As production fell and unemployment increased, factories began to close. Ford shut down his Detroit factories – 75,000 people were laid off. Farm prices began to fall – In 1929 wheat was $1.18, in 1932 it was $0.49. 12 million unemployed (1/4 of labor force) GNP: 1929 - $103 billion; 1933 - $56 billion
Impact on the World Countries in Latin America and Europe depended on the U.S. markets for goods, investments and loans. Global economic system crumbled. Americans couldn’t invest in German goods German banks failed suspended reparation payments Allies stopped paying debts Industrial production fell = FAILURE OF GLOBAL ECONOMY!
CLOSURE What factors lead to an unsound economy? What four factors involved all Americans in the Great Depression? Out of those four, which do YOU feel had the biggest effect on America’s economy? Explain! How did America’s depression send the world into a global economic crisis?
The Dust Bowl was a period from 1930-1936 characterized by severe dust storms causing major environmental damage. Caused by severe drought and bad farming practices Great Plains region The Dust Bowl
You are now going to read more about the Dust Bowl’s causes and effects. As you read, answer the questions on the worksheet. Be ready to discuss! Dust Bowl Reading
“Dust Storm Disaster” We will now read a poem written by Woody Guthrie As you listen to the poem, answer the questions on a separate sheet of paper.
“Brother, Can You Spare a Dime?” A 1932 song by Bing Crosby Demonstrates the horrific conditions of the Great Depression for workers. Listen to the song and answer the questions on the board.
“Brother, Can You Spare a Dime?” Why did they tell him he was “building a dream?” What happened to this dream? Why does he say everything he built is now done? What tone is portrayed in the song? What kind of life do you think he’s living? How does this song relate to the conditions we’ve been talking about during the Great Depression?