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Financial Collapse - Coggle Diagram
Financial Collapse
Weaknesses in the U.S. economy made serious problems
Such as uneven distribution of wealth, overproduction from businesses and agriculture, Americans were buying less
In 1929, America had factories that were turning out nearly half of the world’s industrial goods, which lead to enormous profit.
The new wealth was unevenly distributed
The richest 5% gained 33% of all personal income of that year
60% of American families earned less than $2000 a year.
Families couldn't buy all the goods being produced
Stores didn't make profit and weren't selling, stores cut back their orders from factories, factories turned reduced production and laid off workers.
A downward economic spiral began.
During the 1920s, overproduction affected American farmers. Farming methods and new farm machinery had dramatically increased crop yields
American farmers were producing more food
Unable to sell their crops at a profit, many farmers could not pay off the bank loans that kept them in business
Their unpaid debts weakened banks and forced some to close
Depression, Recession, Recovery
Wall Street NY: Everyone is happy with the economy
Middle class people buy stocks on margin
Pay part of the money, borrow the rest
This doesn't work if the stocks aren't making money
People begin to sell their stocks
This number increases until it is an all out panic to sell stocks before everyone else.
Stocks aren't worth much, so the economy collapses.
How did margin buying contribute to the stock market crash?
Depression-Recession-Recovery