Topic: The Stock Market Crash of 1929

I. Buying on Margin

• 1928- Stock profits were 25% annually
• Banks at the same time paid 3% in interest
• January 1928- A person puts $250 down for $1,000 worth of stock
• The Stock Broker takes the $250 and “loans” $750 to the stock buyer
• December 1928- The stock is now worth $1250
• The stock buyer repays the $750 loan and pays $50 in commission to the stock broker
• The profit is $200 for a cash investment of $250.

II. Black Tuesday signals the start of the Depression

• September 1929- stocks are prospering
• October 1929- the broker loans are due
• Between September and October 1929, stock prices had dropped 50% so what was once worth $1000 now has a cash value of $500
• The stock buyers do not have enough money to pay back their loans to the stock brokers
• The stock market crashes

III. The Vicious Cycle

• Over 4 million Americans had invested in the stock market. They are now broke
• Because they have no money, American start to purchase less
• When people purchase less, storekeepers order less
• When storekeepers order less, factories produce less
• When factories produce less, they need fewer workers and people are fired
• When people lose their jobs, they go to the bank and withdraw their money
• When the banks begin to run out of money, they ask people to repay their loans
• When people can’t repay their loans, the banks take away their property and try to sell it
• When no one has money to buy the property, the banks close and people lose their life savings
• When everyone is out of money, AMERICA STOPS!