Chapter 30: Great Depression

Shaky Stock Market -> Bank Crisis
1. Promise of financial gain brought new investors to Stock Market
  1. Result: Bull Market
    1. Correlates with the Speculative Enthusiasm for the Stock Market
  2. Borrowing money was easy to do in 1920's
    1. Buying On margin
      1. Brokers happy to lend money
  3. After Black Tuesday, clear to many investors Bear Market had begun
    1. Banks caught same fever as everyone in Stock Market
      1. They increasingly lended money to Stock Brokers
        Stock Market Crash happened -> Banks stopped looking like a safe place fore people's money
        Result: Bank Runs
Too Much For Sale Too Little to Spend
1. By 1920 many industries used the assembly-line method of mass production
  1. As the 1920's came to end Overproduction overwhelmed economy
    Annotations:
    - Companies overproduced because they could.
    1. By 1929, the buying spree was coming to an end
      Annotations:
      - Everyone had bought what they needed or already wanted by then.
      1. Underconsumption was a result of debt and lack of necessity in materials
        Underconsumption affected Farmers first
        Annotations:
        After WW1 Consumptions of Products decreased and prices dropped.. Caused them to go further into debt. Number of farms and farmers began to decline.
        Resulting from underconsumption: Unemployment
Government Actions Makes a Bad situation Worse
1. Federal Reserve were blamed by economists for further weakening the economy
  1. They manage the money supply, one way is by setting the discount rate
    Annotations:
    - Members banks use the discount rate to determine the interest rates they will charge borrowers.
    1. Before Stock Market Crash, Feds kept interest rates low
      Annotations:
      - Made easy borrowing possible
      1. Easy borrowing kept money circulating
  2. 1931, began raising the discount rate
    1. This decreased the amount of money circulating through the economy
      1. Turned recession into an economic calamity.
2. Economists also blame Congress for making decisions that further hurt the economy.
  1. Congress passed the Hawley-Smoot Tariff act
    1. It triggered a trade war that ended up causing the Great Depression to spread around the globe

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Chapter 30: Great Depression

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	Created by Michelle M almost 9 years ago