Unit 18: Great Depression

• Roles


  • Farmers $50
  • Factory workers $75
  • Business owners $100
• Buying and Selling Stocks

  You can hold onto your money or buy stocks
• Types of stock


  • $5
  • $10
  • $20
• If you buy a stock, you can not sell it for 3 days
• Dice


  • Beck $20
  • Grasso $10
  • Greene $10
  • Lib $10
  • Langmead $5
  • Paulus $5
• Red Dice (your fate)


  Number of white dice rolled for stock game
• If your number is rolled

  Your stock value doubles for that stock
• For the stocks that didn't hit

  Roll the red dice again
• Even


  Stock stays the same
• Odd


  Stock cuts in half
• Life card time


  Roll red dice
• Even


  Good life card
• Odd


  Bad life card
• The Great Depression


  October 29, 1929
• The Great Depression lasted from 1929-1941
• Objectives


  • Explain how the Stock Market crash helped lead the United States into the Great Depression
  • Describe the experiences Americans had during the Great Depression
• Dow Jones Industrial Average

  Average of stock prices of major industries
• Dow Jones Industrial Average: 191 points (January 1928) -> 122 (March 19) -> 381 (September 3)
• 4 million/120 million Americans owned stock (3% of population)
• Because of the booming 1920's economy, money was plentiful, so banks were quick to make loans to investors
• Buying on margin


  Investors only had to pay for 10% of the stock's actual value at time of purchase, the balance was paid at a later date
• Stock speculation


  People would buy and sell stocks quickly to make a quick buck
• Because of all this buying & selling, stock value increased (Ex: G.E stock $130 -> $396/share)
• This quick turnover didn't aid consumers - they needed long term investments so they could pay bills (stock value was like an illusion)
• Unscrupulous traders would buy and sell shares intentionally to inflate a given company's stock value
• All of this gave a false sense of security/confidence in the American market
• October, 1929- stock prices fell slowly
• Some brokers called in loans while others lent more
• October 24- worried investors began to sell and stock prices fell
• Investors in G.E., bought for $400, sold for $283 a share
• October 29- record 16.4 million shares sold
• Average of 4-8 million shares sold a day earlier in the year
• Continued into November with losses totaling $30 billion
• All tried to sell at once and bottom fell out of market = panic selling
• Many bankruptcies as banks called in loans
• Only a minority of people traded on the stock exchange, but they possessed vast wealth, and the crash had a ripple effect on the economy
• The Great Crash part of business cycle (economy grows and contracts)
• Arthur M. Schlesinger, Jr.: 'Management's disposition to maintain prices and inflate profits while holding down wages and raw material prices meant that workers and farmers were denied the benefits of increases in their own productivity. The consequence was the relative decline of mass purchasing power. As goods flowed out of the expanding capital plant in ever greater quantities, there was proportionately less and less cash in the hands of buyers to carry the goods off the market. The pattern of income distribution, in short, was incapable of long maintaining prosperity.'
• Arthur M. Schlesinger, Jr.: 'Seven years of fixed capital investment at high rates had "overbuilt" productive capacity (in terms of existing capacity to consume) and had thus saturated the economy. The slackening of the automotive and building industries was symptomatic. The existing rate of capital formation could not be sustained without different governmental policies – policies aimed not at helping those who had money to accumulate more but at transferring money from those who were letting it stagnate in savings to those who would spend it.'
• Arthur M. Schlesinger, Jr.: 'The sucking off into profits and dividends of the gains of technology meant the tendency to use excess money for speculation, transforming the Stock Exchange from a securities market into a gaming-house.'