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WARM #8

HOW IS THE SQUIRREL’S QUESTION IRONIC OF THE GREAT DEPRESSION?

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Thrift, frugality and avoidance of debt –if you didn’t have the cash, you didn’t buy it

Replaced by easy credit and installment payments of the Roaring 20s

Overproduction Flood of consumer products: automobiles, radios,

refrigerators Purchased on installment plans

Manufacturers produced more goods than people were buying How many refrigerators or radios did a person need?

Impact: Cut production Layed off workers

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Many people didn’t make enough money to buy basic necessities

66% of Americans were just getting by

SPECULATIONPeople bought stock hoping to “get rich quick” = speculation

Betting the market would keep going up & they’d make $$

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With a 10% down-payment, a person could finance the rest of the purchase

Ex: $1000 down to buy $10,000 in stock$9,000 was in an interest bearing loan

If the stock price fell, purchaser was responsible for the whole priceThe banker could call in the total amount of the loan + interest.

BANKING PROBLEMS Some bankers invested depositors’ money in unsound

investments Lent billions to stock speculators Invested people’s savings in the stock market

No government regulation of these practices

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Black Thursday: October 24th , 1929 Stock prices declined rapidly and people started selling stock as rapidly as

possible

Black Tuesday: October 29th , 1929 Market Crashed

Stock prices crashed and people panicked to sell stock Losing 90% of its value ($30 billion)

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BUSINESSES FAIL Demand for products in America & overseas decreased By 1932, over 80,000 businesses failed

Impact Workers laid off or wages reduced by 42% Demand for products were reduced even further

UNEMPLOYMENT By 1932, about 25% of the worker (15 million) were unemployed

Impact: Millions depended on soup kitchens Number of children sent to orphanages increased 50% Older children were forced to leave home to find work “Poor man’s divorce” – husbands abandoned their families

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BANKS FAIL Banks lost money on its investments and from speculators who couldn’t pay

back their loans Depositors made a “run” on the banks to withdraw savings before the bank

failed Impact:

By 1932, 25% of all banks were closed Savings were wiped out ($9 million)

FORECLOSURES INCREASE Without jobs, decreased wages, and debt, people lost homes and farms

Forced to living on the street or in makeshift shacks

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EXIT TICKET

Place the 6 causes of the Great Depression in order of most important to least important.

Explain why you think the one you placed 1st was the most important cause of the Great Depression.