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Good Morning!

Good Morning!. NVC/Welcome Back HOT ROC: Speculation Causes of the Great Depression Essential Question: What caused the Great Depression? Homework : Cornell Notes pg. 383-385. HOT ROC: Speculation. Peanut the Dark Blue Elephant Prices: 1993: $6.99 1995: $49.00 1998: $1,200.00

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Good Morning!

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  1. Good Morning! • NVC/Welcome Back • HOT ROC: Speculation • Causes of the Great Depression Essential Question: What caused the Great Depression? Homework: Cornell Notes pg. 383-385

  2. HOT ROC: Speculation • Peanut the Dark Blue Elephant Prices: • 1993: $6.99 • 1995: $49.00 • 1998: $1,200.00 • 2000: $3,005.00 • What are the pros and cons of investing in Peanut the Dark Blue Elephant?

  3. Black Tuesday: October 29, 1929 “On that overcast autumn morning in New York City, rumors swirled through the narrow streets like wind. Something had gone terribly wrong. The stock values weren’t just dropping. They were crashing. America’s banks and businesses were losing money. By afternoon ten thousand people had jammed the streets and sidewalks. Some had climbed onto the statue of Alexander Hamilton outside the stock exchange building because it was the only space left to stand and wait. A reporter for the New York Times described the crowd as ‘wild-eyed’ with fear. Men wept. A few days ago they had been wealthy. Now they were penniless.”

  4. The “Roaring” Twenties • 1920s = Bull Market • Rising stock prices the result of Speculation • assume stock is valuable and will continue to increase in value • Boom in stocks encouraged during the Republican Era • "Stock prices have reached what looks like a permanently high plateau.“—Irving Fisher

  5. The Stock Market Crashes • Speculative Bubble: an unrealistic increase in economic value that cannot be sustained • Stocks NOT ACTUALLY THAT VALUABLE • September 1929 clear the stock market unstable • Smart investors start selling • Black Tuesday: mass panic. Everyone sells and no one buys

  6. People Lose Everything • Buying on the Margin: borrow money to buy stock using your stuff as collateral/security • investors collect borrowed money by TAKING YOUR STUFF! • Banks Collapse • Banks loaned out most of the money that was lost • Bank Runs: people panic and withdraw their money • banks RUN OUT OF CASH

  7. Hidden Problems with the Economy • Unequal distribution of wealth • Small amount of super rich and lots of poor! • People cannot afford to buy what the economy is making • Overproduction: more products are being made than people can buy • Underconsumption: people not buying as much as the economy is making

  8. The Government Screws It Up More • Federal Reserve (“Fed”) national bank that loans money to other banks • Fed worried banks won’t repay loans • Raises interest/discount rate = now harder to borrow money • No borrowed money = businesses go out of business!

  9. The Government Screws It Up More • Hawley-Smoot Tariff Act (1930) • Tariff: tax/fee on imported goods • Europe raises tariffs in response • NO INTERNATIONAL TRADE

  10. The Real Estate Bubble and the “Subprime Loan Crisis” (2007)

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