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Chapter 21-1

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Kirsty Kerr

on 14 January 2014

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Transcript of Chapter 21-1

Change and Continuity

By Kirsty Kerr, Sarah Klebanov, Chris Declement and Olivia Clark
Before the Crash
Americans could easily use credit to pay for things on their credit account when they don't have enough ready cash.
Many Americans used this form because it was a very fast and easy way of paying for products
People mainly used installment buying plan, paying a small down payment and then paying it off over time
After the Crash
People began to misuse credit by loading on too much money onto their account that they did not own.
Americans accumulated more and more debt
Americans could not pay off the money they owed
Stock Market
Before the Crash
Dizzying bull market
Americans easily sold and bought stocks, gaining a lot of money
By 1929, around 4 million Americans owned stocks
People could get rich overnight by trading stocks
After the Crash
The stock market crashed during the Great Depression
Too much money was being put into stock speculation
Stock prices increased and decreased unevenly
After time, the prices eventually only went downward
Many people lost lots of money
Buying on Margin
Before the Crash
Many Americans used this form of credit
The system between the broker and buying functioned well
A buyer pays as little as 10% of the stock price upfront to a broker. Then the buyer paid the broker the rest of the stock over a period of months
After the Crash
Many people abused this system to invest huge sums of imaginary money that existed only on paper.
In 1929, stock investors began to only sell their stocks which forced the stock prices to fall.
Brokers asked investors to pay their debts, but when they could not repay, they were forced to sell, causing the prices of stocks to fall even more.
Agricultural Sector
Before the crash

Throughout the Roaring 20's, unlike the rest of America, farmers and those living in the country did not participate in the booming economy and most consumer benefits.
Farmers suffered from growing debt due to their failure to sell off their huge crop surpluses (caused by overproduction)and purchases of costly farm equipment.
After the crash
For farmers, the situation got even worse in the 1930's.
Many lost their farms and crop prices continued falling, adding new debts.
About 1 million farmers could not pay their mortgages and as a result lost their farms.
Drought conditions in the Great Plains made situations even worse for farmers, for the land was not suitable for farming.
Uneven distribution of wealth
Throughout the Roaring 20's, Americans in the cities and suburbs were prosperous and reaped the benefits of the booming economy
There was another side of America though, a poorer side outside the economic boom (most living in country)
The wealthiest were urban residents (owners and managers of business) who pumped money back into the bull market
The uneven distribution of wealth caused great economic problems for the 1930's,
for the wealthiest people earned 50x more than most families, but did not buy enough to keep the economy booming.
Also, corporate profits increased 65%, creating even worse economic distribution and stability in the 1930's.
Throughout the 1920's, farmers were among the few who weren't thriving and successful. In the 1930's, people in agricultural parts of America continued to have larger debts and situations worsened.
The uneven distribution of wealth was a major cause of the Great Depression and continued to remain a problem during the 1930's.
The united states owned credit from Europe after the great war from war debts and on top of that some european countries had reparation payments to pay. After the beginning of the depression. The U.S. decided to suspend France and Britain's war debt payments.

France and Britain needed to suspend the debt payments to the states because due to highly protective tariffs, this depression was now a global one. When the united states passed the Hawley-Smoot tariff, it set a chain reaction where many more countries would set highly protective tariffs into place, these were so severe that a domestic good had no chance of competing in a foreign country. Destroying markets world wide, making the depression more severe and a deeper hole.

Before the depression there was an consumer revolution where a majority of americans would be buying from a new class of goods- consumer items were bought mainly on credit or borrowed money.
After the crash, 80% of radios and 60% of cars were bought on margin. Americans could not pay these items off and found themselves in debt.

When buying an item one would pay off over time instead of saving the money and than buying it. After the americans could not afford to pay off these items any longer they found themselves in heavy debt.

Effects of Auto Industry
Pre and post stock market crash
- Henry Ford revolutionized auto production
-Before Fords mass production only wealthy city duelers owned cars
-1908 Ford brings the "Model T" to average americans for $850 dollars
-Ford hires scientific management experts to help him get his cars on moving assembly lines and contintued to drop the Model T sale price
-1919 only 10% of American families owned auto
-1927 56% owned auto
-Booming auto sales allowed people to live farther from cities and suburbs grew
-August 1931 Henry Ford closes several Detriot automobile facotries
-75,000 people are put out of work as a result
-Steel, glass, rubber, asphalt, wood, gasoline, insurance, and road-construction industries that had benefitted from the auto industry boom suffered as a result of loss of auto sales
-"Trickle-down" effect was felt by thousands of gas service stations, diners, and motels (moter hotels) that had enjoyed booming growth due to the millions of cars on american roads in the 1920s-1930s
The American "Mood"
Pre Great Depression
Post Great Depression
"No nation in the history of the world was ever sitting as pretty." -Will Rogers, a popular entertainer expresses America's belief that it was economically invincible
- "...our American experiment in human welfare has yielded a degree of well-being unparalleled in all the world. It has come nearer to the abolition of poverty...than humanity has ever reached before." -Herbert Hoover 1928 campaign speech
-"Oh, hush, my babe, granny's bought some more shares, Daddy's gone out to play with the bulls and the bears,
Mother's buying on tips and she simply can't lose,
And baby shal have some expensive new shoes!" -The Saturday Evening Post,1929
-October 24, 1929 became known as "Black Thursday" ; indicating the depressed mood of investors
-October 29, 1929 became known as "Black Tuesday" or the day the bottom fell out in the "great crash"
-Wall Street described to be in a "panic" as investors who had bought stocks on speculation lost fortunes
-Words like "collapse", "crash", "black", "panic", and "depression" are in daily use by the press, investors, polititions, and everyday people
-Banks are not decribed as having closed--but instead are said to have "failed"
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