Causes of the Great DepressionPresentation Transcript
Causes of the Great Depression
Speculation• Bull Market• Buying on the Margin• Speculation• Black Tuesday• Bear Market• Bank RunsSpeculative bubbles from thepresent?
Yee Haw Stock Market Crash 1929Students selected the “Go for theGold” optionSome students bought bonanzachipsPoint values decreaseddramatically, all but those who heldtight lost everything they had andsometimes moreEven those who played it safe losttheir credit
Overproduction, Underconsumption, and Concentrated Wealth• Mass production• Overproduction• Underconsumption• Wealth Gap• Downward spiralSpeculative bubbles from thepresent?
The Stock Market Crash of 1929 The Banks The Borrowers The BusinessesThe bank gives a $100 loans for The recipient takes a $100 loan from the bank. The$20 up front. The bank has $20. recipient has $100. The recipient buys two shares of stock for $50 each. The business sells two The recipient has $0. Buying with loaned money is shares of stock for $100 referred to as buying on the margin. and invests it in land. The businessman has $0 Speculation causes stock prices to rise to $75. The recipient takes another $150 loan. And buys twoThe bank gives a $150 loan for more shares of stock. The recipient has $0.$30 up front. The bank has $50 European investors get nervous and start selling their stock investments. As prices fall, they gain momentum. The recipient attempts to sell all four of his stocks for $25 each, for a total of $100. The land that the business bought was overpriced because of speculation and becomes worthless. The business no longer has enough money to operate.