T H E S L O W B U I L D T O B L A C K T U E S D A Y
THE DEPRESSION HITS
THE ECONOMIC BOOM
• In spite of European problems, the
American economy was booming
in the 1920s.
• American companies continued
producing high volumes of items,
expecting trade to continue at
the high levels of the war years.
• Farmers, meanwhile, were
experiencing the depression early
because Allies were no longer
needing to purchase food from
• Factory workers were still paid low
THE INSTALLMENT PLAN
• Many Americans had bought things on the
Installment Plan (a form of credit) but by the end of
the 1920s were discovering they were at the end of
their credit limits.
STOCKS AND THE MARKET
• Stocks are portions of companies people purchase.
• The 1920s seemed like a boom time because many
Americans increasingly bought more stock in U.S.
companies, hoping the good times would continue.
• People often bought stocks on credit which was risky.
• As long as prices (the value of the company rose), you made
money and could pay it back, but if the stock lost value, you
were in trouble.
• A byproduct of people buying stock in a company is that the
stock rises. This leads to more people buying the stock. The
problem becomes if people stop buying what the company
makes, a lot of people have been roped into buying stocks for
companies people don’t trade with.
EUROPEAN PROBLEMS COME HOME
• Unfortunately, this is when Europeans
stopped buying American items to
try and fix their own economies.
• American companies had large
surpluses because their items weren’t
• This led stock owners to sell their
stocks, causing stock prices to begin
• Banks then began to demand
payment for the loans people used
to buy the stocks but the people
didn’t have the money to pay them
• As investors freaked out and began selling their
stocks, they began withdrawing all of their money
from the banks to pay bills.
• On October 29, 1929, the Stock Market crashed. It
was the biggest loss of money on the stock market.
WASH, RINSE, REPEAT
• Because the Stock
companies laid people
• This made the surplus
stock grow, because
less Americans could
buy companies’ items.
• More people then went
to the banks to
withdraw all their
• More layoffs
RUNS ON THE BANK
• When people ran to
get to their money out
of a bank, it was
called a “run on the
• Banks loan money out
using the money put
• When people took
their money out
suddenly, many banks
had to close
CALLING IN THE LOAN
• At the same time, in an attempt to recoup
the money they were losing, banks
required people to pay ALL the money
they were loaned or they would lose their
CONTINUING THE CYCLE
• Unemployment and
increase, banks and
and the economic
depression in the
U.S. then intensified