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The Great Depression and "Recession" Project

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Scott Hinckley

on 20 April 2010

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Transcript of The Great Depression and "Recession" Project

In the 1920's, there was a lot of artifical wealth created. Many people were rich on paper, but had no tangible holdings to back it up. Companies invested in each other and the stock market was artifically boosted. In October 1929, when citizens began a "run" on banks to withdraw their money, it was discovered that their money wasn't really there. This led to panic, bankruptcies, unemployment and foreclosures The Great Depression And "The Great Recession" Project
By: Scottie Hinckley

Although the stock market has the reputation of being a risky investment, it did not appear that way in the 1920s.As more people invested in the stock market, stock prices began to rise. When someone did not have the money to pay the full price of stocks, they could buy stocks "on margin." Buying stocks on margin means that the buyer would put down some of his own money, but the rest he would borrow from a broker.On March 25, 1929, the stock market suffered a mini-crash. It was a prelude of what was to come.On September 3, 1929, the stock market reached its peak with the Dow Jones Industrial Average closing at 381.17. Two days later, the market started dropping.On the morning of Thursday, October 24, 1929, stock prices plummeted. Vast numbers of people were selling their stocks. Margin calls were sent out. People across the country watched the ticker as the numbers it spit out spelled their doom. The ticker was so overwhelmed that it quickly fell behind. A crowd gathered outside of the New York Stock Exchange on Wall Street, stunned at the downturn. Rumors circulated of people committing suicide. With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and thus a reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation.

Many Americans bought goods on credit, but they
couldn’t afford to pay the bills for the things they had bought.
When the economy slowed down and people lost their jobs they
defaulted* on their loans causing the economy to slow down.

*default – failure to meet and obligation; especially a financial one. (also see bankruptcy)

bankruptcy- the condition of being unable to pay one’s debts; one’s property is managed or sold to pay those to whom one owes money.
Unemployment Stock Market Crash of 1929 While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. Supidity WW1 europe was taking loans from the bank and not being able to pay them back which made the banks fail and shut down. people who made deposites lost most of their money and sence money was already tight buisnesses had to cut people's pay and sometimes fire the workers which left them jobless and sometimes homeless. Hoover tried to fix it by creating projects such as the Boulder Dam, which was designed to jump start the economy and add jobs. He wanted to reform banking which would create motgage relief, and put more federal money into business investments. Congress also passed the Federal Home Loan Bank Act, which lowered mortgage rates for homeowners and allowed farmers to refinance their farm loans and avoid foreclosure. The best thing he did was the Reconstruction Finance Corporation, that authorized him to provide emergency financing to banks, life incurance companies, railroads and other large business.

Franklin D. Roosevelt created the New which created programs to help stabalize the economy.
Stock Market Crash of 2008 On October 6, 2008 the stock market crashed yet again, it started declining in which the Dow Jones Industrial Average would fall 1,874 points or 18.1%. What do they both have in common? Both stockmarket crashes occured in October!

During both times the Banks loaned money to people who couldnt pay it back.

Unemployment rates rose unusually high during these times Credit In today's society it is much like the Roaring twenties. People see that they have a 20,000 spending limit on a credit card and go crazy. That is just plane stupid, yes you can spend 20,000 dollars but you have to have the money to actually do it. People all over our country suffer from this ignorance and that is part of the reason our economy is in the shape it's in. People are spending money they don't have and bailing on their debts to the credit unions. Unemployment fell from 10.2 percent in October to 10 percent in November as the participation rate of the labor force and the population of the work force both dropped. The U.S. labor force dropped 98,000, while the number of individuals not in the labor force increased by 291,000. Unemployment
President George W. Bush created the stimulus package, which is supposed to put capital into the economy that will create jobs, such as rebuilding infrastructure. The theory behind this is that more jobs will mean more spending by the people that get these jobs, such as the purchasing of goods, home loans, car loans, student loans. Also, around 30% of it is tax cuts. It also allows homeowners to refinance their homes at a lower rate so they will have the ability to pay off their loans. The drawback is that the national debt will increase. Also, we run the risk of hyperinflation. We have to print more and more money to finance these things. Which as you can tell is a bad thing..... Duh.

President Barack Obama has signed the American Recovery and Reinvestment Act which saves or creates 3.5 million new jobs. He has also created a new housing program which has stabilized the market, preventing more foreclosures and helping millions more re-finance at historically low mortgage rates
Banks Banks today have began to repeat their process of handing out loans to people to buy houses and other things they need. But they are not doing their job before they give the loan to the person they dont check to see if they can pay it back or not. Banks are not only doing this for individuals but they are also doing this for companies aswell. Drought Presidents during the time where Herbert Hoover and Franklin D. Roosevelt. The "Great Recession" President George W. Bush and Barack Obama where presidents during the time of the "Great Recession" What can we do to Prevent this from happining again? LEARN FROM HISTORY!!!!!!
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