The bank is using your money to loan out to others. Your $ may be loaned to someone for their car loan or their student loan. That’s why the bank pays you interest! So if a bank makes several risky loans and loans it out to people who don’t pay it back, the bank loses their (your) money and the bank has to close. If you had money inside a bank that closed, you never saw it again!! This is the #1 reason why the stock market crash effected people who never invested in the stock market! Don’t worry…because of the events of 1929, the US government has passed laws to ensure something like that doesn’t happen again. Your money is safe!
Black Tuesday Watch this short clip on the events of Black Tuesday and their effects. ? v=Yp7u328PKu4
Causes of the Depression ■ The Stock Market: – On October 29, 1929 (Black Tuesday ) the stock market crashed – People rushed to sell, prices plummeted, & investors lost $30 billion – Speculators who bought on the margin, could not pay off their debts – Many lost their savings The stock market crash in October 1929 marked the beginning of the “Great Depression”
The U.S. stock market had only about 3 million active buyers & sellers but the spillover into the greater economy led to the Great Depression
Causes of the Depression ■ Bank Failures: – After the crash, people tried to withdraw their money from banks – In 1929, 600 banks failed due to lack of funds & the inability to recoup loans – The failure of the banks left many Americans without their life savings
Bank & Business Failures, 1928-1933
Causes of the Depression ■ Foreign Trade: – Post-war debts in Europe & high protective tariffs in America limited international trade – The Great Depression led to a global depression in Europe, Asia, & Latin America – World trade fell by 40%
1920’s GERMANY & AUSTRIA BRITAIN & FRANCE US BANKS (Reparations $$) (Paying off war debts) (Loans $$) They owe $30 BILLION, or Allies take Berlin! WHAT’S THE PROBLEM HERE??? If one falters, it all falls apart. The US is holding everything together! Remember thi s chart from the end of Unit 9 & WW1?
A Global Depression
Causes of the Depression ■ Consumer Confidence: – Millions of Americans lost their jobs or took pay cuts to keep jobs – The lack of confidence in the future kept people from spending money – The lack of spending made the depression drag on until the 1940s
Unemployment & Consumer Spending, 1928-1933
Causes of the Great Depression (Day 2)
Effects of the Great Depression ■ The Great Depression led to a collapse of the U.S. financial system – 25,000 banks & 90,000 businesses failed by 1933 – Unemployment peaked at 25% – Many Americans lost their homes – America had record poverty & suicide rates; Fathers abandoned families; Healthcare declined – Private charities created soup kitchens & breadlines to help
Causes & Effects of the Great Depression
Soup Kitchens & Breadlines Check out the mural behind this group of people standing in line at a soup kitchen. Is the advertisement reality? It looks like those days are a thing of the past!
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