#71 From War Roar to Ruin ch 20

Last Update: February 14, 2017

OK PASS Objectives

Ford introduced the Model A in 1927 which had a great impact on American society.

   Improved transportation

1.  gave rise to suburbs,

2.  people planned vacations, parks, motels, tourism

3.  teenagers used the car for unchaperoned dates.

Content Standard 4:
2. Analyze the effects of the destabilization of the American economy.

B. Identify causes contributing to an unstable economy (e.g., the increased reliance on installment buying , a greater willingness to speculate and buy on margin in the stock market, and government reluctance to interfere in the economy or laissez-faire policy ).

First commercial radio station KDKA in 1920

By 1928 Americans gathered around the radio and listened to songs, stories, comedians, and hear the news.

 
On a Spending Spree

        Age of Prosperity in the Roaring Twenties

Real wages  wages in relation to buying power.

Laissez faire:  the economic idea that the government should keep their "hands off business".  Coolidge used this principle during his administration.

B. Identify causes contributing to an unstable economy (e.g., the increased reliance on installment buying , a greater willingness to speculate and buy on margin in the stock market, and government reluctance to interfere in the economy or laissez-faire policy ).

advertising became a big tool for companies to get the public to buy their products. By 1929 more money is spent on advertising than on education.
Credit: buying merchandise and making monthly payments.  Spending spree Boom is built on credit ready for Bust.

People owe more to creditors than they have in the bank most Americans (80%) have no savings.

 

Boom goes Bust

Causes of Great Depression

1.  Easy Credit  installment plans

2.  Stock Market 3.  Risky investments

 

 

 

 

4. Speculation

What is speculation?

What does it mean to buy stocks on margin? p 484

Margin
D. Analyze the effects of the Stock Market Crash 1,2,3 between October 1929 and March 1933 (e.g., unemployment 1, the shrinking economy, Herbert Hoover’s economic policies

Margin means buying securities, such as stocks, by using funds you borrow from your broker. Buying stock on margin is similar to buying a house with a mortgage. If you buy a house at a purchase price of $100,000 and put 10 percent down, your equity (the part you own) is $10,000, and you borrow the remaining $90,000 with a mortgage. If the value of the house rises to $120,000 and you sell, you will make a profit of 100 percent (closing costs excluded). How is that? The $20,000 gain on the property represents a gain of 20 percent on the purchase price of $100,000, but because your real investment is $10,000 (the down payment), your gain works out to 200 percent (a gain of $20,000 on your initial investment of $10,000).  Brokers can call in their margins any time and demand balance due.

Black Tuesday  October 29, 1929, the day the bottom fell out of the market.                                                     Watch Stock market Crash "Most" 5 min video:

With the crash of the stock market, Americans, now mired in debt and pessimistic about their future, tightened their money belts in an attempt to regain their own economic security.  This reminded many of the recession of 2007-2010.

C. Examine changes in the business cycle (e.g., the “Black Tuesday” Stock Market Crash and bank failures.

 

 

 

   

Photo Credits:

Model A: http://blog.pennlive.com/thrive/2007/07/1929%20Model%20A%20Ford.jpg

Wall Street Crash: http://www.papoose-yacht.com/images/wallstreet-crash.jpg