Ripple effects of the Crash

2.  “We in America today are nearer to the final triumph
over poverty than ever before in the history of any
land”.
 Who do you think said this??
 15 months later, the nation fell into the most severe
and most prolonged economic depression in its
history.

3.  The following are examples of how the crash affected
all Americans:

4.  Banks loaned huge sums of $ to high-risk businesses
 When stock prices fell, these businesses were unable
to repay their loans

5.  Consumers had borrowed heavily from banks during
1920’s to purchase consumer goods
 When banks called in their loans, customers did not
have cash to pay them

6.  People rushed to banks to withdraw $ from their
accounts
 To pay back these deposits, banks had to recall loans
from their borrowers
 Many could not repay their loans
 Banks couldn’t get money back fast enough

7.  Unpaid loans and bank runs led to bank failures
 Thousands of banks closed their doors in a few years
time

8.  Bank failures wiped out what little savings people had
 By 1933, money from 9 million savings accounts was
GONE

9.  Businesses could not borrow money to produce more
goods
 Businesses lacked incentive to spend money to
produce goods
 Few people had money to buy them

10.  As businesses cut back on production, workers were
not needed, so unemployment grew

11.  Consumers spent less and less as unemployment grew
 Businesses produced even fewer goods
 Output of goods in the economy dropped

12.  The Great Depression
 1929-1941, until start of WWII
 Most severe economic downturn in nation’s history
 Unemployment was as high as 25%!
GNP was $103 billion in 1929; $56 billion in 1933

13.  Three major underlying causes of the Depression:
 1. An Unstable Economy
 2. Over-speculation
 3. Government Policies