Great Depression

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Great Depression

Brother can you spare a dime?

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OBJ #1 - Describe the CAUSES and SPARK of the Great Depression. How did Overproduction affect both farmers and industry? What system collapsed and caused millions to lose their savings? Explain how buying on Margin created the Spark. How did people lose money because of the spark?

I. OBJ #1- Cause & Spark of the Depression

A. Causes of the Depression

1. Overproduction, too much stuff (Factories and Farms)

a. Factory Workers begin to get layed-off

- Workers cannot buy goods, even more goods are overproduced

b. Farmers Can’t Survive

-low prices (can’t pay loans / make a living)

c. Supply & Demand- Prices Drop

2. Bank Failures

a. Banks close and loose $$$

b. People default on loans (Can’t pay Back)

c. Banks cannot cover their deposits, because it was lent out to bad creditors **5,000 banks close between 1929-1932**

d. People loose entire LIFE SAVINGS

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1920’s Problems

Factories making Too Much, Farms growing too much

Factories Fire Workers (Don’t need them)

Farm Prices fall (Farmers can’t make $$)

Farmers & Factory Workers can’t pay back loans to Banks: DEFAULT!!

Banks Close because they have no money: Loans have not been paid back, can’t give people their savings

BANKS Have NO $$

PEOPLE LOST SAVINGS & JOBS

NO ONE TO HELP!

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=

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People Default on Loans

Banks have no money to give people

Banks Close

People Loose savings

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OBJ #1- Cause & Sparks of Depression

B. SPARK!!! Of the Depression

1. Stock Market Crash, Black Thur. Oct. 29, 1929

a. Summer 1929, Investors begin to sell stocks

b. Supply & Demand Again – Massive Sell-Off and prices begin to

2. How???

a. Buying on Margin (Borrowing $$)

- Buy stock by just paying a small portion of what the stock is worth

ex.- 100 shares at $10= $1000 only pay $300

still owe $700

-Problem, stock crashes and you loose your money and can’t payback stock broker

- stock broker can’t pay back bank

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OBJ #1- Cause & Sparks of Depression

QUICK REVIEW:

Causes: 1. Overproduction

2. Bank Closings

Spark: 1. Stock Market Crash

Results: 1. Unemployment