Post on 26-Dec-2015
THEN: Stock Market Crash
• October 29, 1929• Investors ruined and banks
closed:
businesses can’t grow businesses forced to cut
back on production, lower wages or layoff workers
WHY?: Margin Buying/Speculation
• Paying a small part of a stock’s price as a down payment and borrowed the rest. When the prices went up, one would sell the stock, pay off the loan, and keep the profit
• System worked as long as stock prices kept rising!!
THEN: Unequal Distribution of Wealth
• By 1929 the top 10% of the nation's population received 40% of the nation's disposable income
• Salaries so low, people couldn’t buy what they wanted/needed
• Farm income declined 66% from 1920 to 1929
Income Distribution, 1929
1
5
29
65
$10,000 andOver$5,000-$9,999
$2,000-$4,999
$1,999 andunder
NOW: Occupy Wall Street
In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers)
http://www2.ucsc.edu/whorulesamerica/power/wealth.html
THEN: Bank Failures• Banks in the 1920’s loan too much $$ to investors• Market crashers . Banks not paid back from investors so they can not
give the depositors their cash.
RESULT: BANKS WERE FORCED TO CLOSE!!!! PEOPLE LOST ALL THEIR SAVINGS!!!
THEN: Installment Buying• Allow people to purchase on credit, and
people piled up debts. • They used their money to buy on
margin, hoping that prices would rise and they would make a profit
• When people cant pay back debt, it results in a cutback in spending….which leads to??????
• Inflation: By 1929 71% of American families earn less than $2500/year(minimum needed to live decently)
• However- top 0.1% had a combined wealth of the bottom 42%