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American History Chapter 21-1

American History Chapter 21-1. The Great Crash. Beware of Appearances. 1920s were a period of impressive economic growth. Gross National Product : Value of goods & services produced during a specific period of time. Rose by 30%. The automobile industry drove the growing economy.

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American History Chapter 21-1

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  1. American History Chapter 21-1 The Great Crash

  2. Beware of Appearances • 1920s were a period of impressive economic growth. • Gross National Product: Value of goods & services produced during a specific period of time. • Rose by 30%. • The automobile industry drove the growing economy. • Two groups that did not do well in the 1920s: • Farmers and Unions • Stock market boomed.

  3. Election of 1928 • Rep. Herbert Hoover v. Dem. Alfred Smith. • Hoover won easily.

  4. Signs of Economic Weakness • Unequal distribution of wealth: The wealthy enjoyed most of the prosperity.

  5. More Warning Signs • Buying on margin: Risky practice of buying stock on credit. Example? • Stock brokers could demand their money back if the stock falls below a certain price. • Federal Reserve System: The nation’s central bank. • Tried to slow buying on margin by raising interest on loans. • Didn’t work as corporations began loaning money. • Car sales began to decrease.

  6. Stock Market Crash • Thursday, Oct. 24, 1929: A huge sell-off of stocks took place. • Caused stock prices to plunge. • Leading bankers joined to buy stocks to stop the plunge. • Tuesday, Oct. 29,1929: Black Tuesday • Investors panicked, dumping millions of stocks. • The stock market dropped in value by $16 billion.

  7. Effects of the Stock Market Crash • President Hoover downplayed it: Saying the economy would bounce back quickly. • Many investors lost everything. • Triggered a banking crisis: • Panicked customers rushed to withdraw their money. • Many banks had invested in the stock market. • Had made loans to stockbrokers. • Many banks had to go out of business.

  8. More Effects • Businesses suffered: • No money available for growth. • Americans began buying only essential items. • Had to lay off workers. • Effects Overseas: • Fragile European economies took a step backwards. • American banks wanted their loans back. • Couldn’t export as many goods to the U.S. • Tried to protect themselves with high tariffs.

  9. Now how did they manage that?

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