The Optimism of the 1920s
Concealed Problems in the
American Economic System
Question: How Strong was the
American Economy in the
1920s?
The United States Economy
Grew During WWI
United States’
Industries
Telephone
Sewing Machine
United States’ Industries
Radio
Ice Box
Everyone Wanted the New
Inventions, so Radios and Washing
Machines Were Bought with “Pay As
You Go”.
In 1916 the United
States produced
one million cars.
In 1920 the United
States produced
four
million cars.
In 1929 the United
States produced
26 million cars.
Cars
What is Another Word for “Pay
As You Go”?
Advertising
Many people chose to invest in
the stock market.
Buying on Margin
• Many people who wanted to buy stocks
soon began to buy on margin.
• In 1927 the average price of a stock was
selling at $85 a share.
• By 1929 the average price of a stock had
grown to $216 a share.
Summarize
• In your own words, summarize how
buying stocks on margin was a problem.
Question: Why did the Stock
Market crash?
• In 1929 only about one out of every ten
Americans even owned stocks.
• Most Americans making about $1,000 a
year. They simply could not afford to buy
stocks.
Banks invested the money people had saved
in them in the stock market. They didn’t
need to ask the investors’ permission.
• In the 1920s this was perfectly legal.
The Crash
The Crash
• With the value of stocks now at pennies
on the dollar, the money supporting
businesses across America disappeared.
The Crash
• When the money supporting these
businesses disappeared, so did the jobs
they provided.
• Between 1929 and 1932 more than
100,000 businesses closed.
• All those jobs were gone…
• This created a run on banks as people
panicked and rushed to pull out their life
savings.
• With no money to operate, banks began
to fail.
In 1929 630 banks closed their
doors.
In 1930 1,352 banks closed
their doors.
In 1931 2,994 banks closed
their doors.
• Because there was no banking insurance,
everyone who had money in the bank
simply lost it.
• More than $1,000,000,000 in savings
simply disappeared.
• By 1932, the United States was producing
half of what it had before the crash.
• One out of every four people was
unemployed.
The Great Depression was on
its way…
Summary: Causes of the Great
Depression
1. People over-speculated on stocks, using
borrowed money that they could not repay
when stocks crashed
Summary: Causes of the Great
Depression
2. The Federal Reserve failed to prevent the
collapse of the banking system
Summary: Causes of the Great
Depression
3. High Tariffs Discouraged International
Trade
$150.00
Made in Great Britain, 1930