Yee Haw!!

Causes of the Great Depression

Speculation• Bull Market

• Buying on the Margin

• Speculation

• Black Tuesday

• Bear Market

• Bank Runs

Speculative bubbles from the present?

Yee Haw Stock Market Crash 1929Students selected the “Go for the Gold” option

Some students bought bonanza chips

Point values decreased dramatically, all but those who held tight lost everything they had and sometimes more

Even those who played it safe lost their credit

Overproduction, Underconsumption, and Concentrated Wealth

• Mass production• Overproduction• Underconsumption• Wealth Gap• Downward spiral

Speculative bubbles from the present?

Government Assistance?• Tariffs worsen things• Hawley – Smoot Tariff Act 1929

The Stock Market Crash of 1929

The Banks The Borrowers The BusinessThe bank gives a $100 loans

for $20 up front. The bank has $20.

         

The bank gives a $150 loan for $30 up front. The bank has

$50

The recipient takes a $100 loan from the bank. The recipient has $100.

The recipient buys two shares of stock for $50 each. The recipient has $0. Buying with loaned money is referred to as buying on the margin.

Speculation causes stock prices to rise to $75.

 The recipient takes another $150 loan. And

buys two more shares of stock. The recipient has $0.

  

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 business sells two shares of stock for

$100 and invests it in land. The businessman

has $0

The land that the business bought was

overpriced because of speculation and

becomes worthless. The business no longer has enough money to

operate.