1920's had been a period of good economic times

Tuesday, Oct. 29th, 1929 - NYC Stock market crashed, causing a depression that would last years

Stock Speculation Unequal Wealth Distribution Poor Government Policies Rising Unemployment Banking Failures Buying on Credit Farming Problems

#1 Stock Speculation Public invests in

companies by purchasing stocks for profit

Investors could borrow money to buy stock. This was known as BUYING ON MARGIN.

Buying on the margin encouraged STOCK SPECULATION (Buying and selling stocks quickly to make a profit)

Stock value increased but didn’t necessarily reflect the true picture of the company (overinflated)

Unscrupulous traders would buy and sell shares intentionally to inflate a given company’s stock value

This gave a false sense of security/confidence in the American market

Farmers were going bankrupt because of over investing

Unemployment rose with little or no government assistance

People were not buying goods so less was produced-so less jobs available.

Electricity was used and production methods improved- less people were needed

Unemployment

More consumer goods were available, but there weren't necessarily more people to buy them (Overproduction)

#3 Uneven distribution of wealth

1% at top owned 25% of the wealth

The middle class depended on their salaries and when productivity declined they lost their jobs

Because of low savings, they had to cut back on their purchases

This decline in consumption among the middle class caused major problems in the economy

#4 Poor Government Policies President Hoover didn't

believe that the government should play an active role in the economy and in helping out the people

He believed in “Laissez Faire” government “hands off” big business

So there were little or no regulations on business and the stock market

Hoover also organized some private relief agencies for the unemployed

Hoover lowered the taxes of the wealthy

Hoover was increasingly unpopular, but he continued to try. He persuaded Congress to establish the

RECONSTRUCTION FINANCE CORPORATION

which had power to make emergency loans to banks

Too little too late… Hoover wouldn't involve

himself in any programs of direct governmental aid to individuals -didn't want to erode Americans sense of "RUGGED INDIVIDUALISM"

During and after WWI the farmers had high production of food

Times were good so they went in debt to expand and buy land

World wide Food Surplus happened as a result of Europe started to produce crops and the US had too many

Food Demand dropped, farmers went bankrupt and their banks closed down.

Americans were buying on credit and taking out loans.

Cars, stock, household appliances. Many did not have money to back up

purchases.

#7 Banking Failures

On October 29,1929 investors’ confidence dropped, leading to a market collapse

Investors tried to sell all at once and bottom fell out of market = panic selling

Lead to the failure of banks.

Because of the booming 1920's economy, money was plentiful, so banks were quick to make loans to investors and to people who weren’t good risks

People wanted their money-Banks didn’t have the money