Lesson video

Hello, I'm Mr. Marchin and thank you for joining me for today's history lesson.

I'll be guiding you through all of our resources today, and my top priority is to make sure that by the end of our lesson, you're able to successfully meet our learning objective.

Welcome to today's lesson, which is part of our unit on the bust years in the USA, where we're asking ourselves, how did The Great Depression affect the lives of the American people? By the end of today's lesson, you'll be able to explain the causes and significance of the Wall Street crash of 1929.

There are five key words which are gonna help us navigate our way through today's lesson.

Those are stock market, speculation, tariff, shares and export.

A stock market is the place where investors can buy and sell shares in companies.

Speculation is when investors purchase shares often with borrowed money, in the hope of selling them off in future for a profit.

A tariff is a government tax on foreign produced goods sold in a country.

Some companies sell shares in order to raise money.

People who own shares in a company receive part of the company's profits and an export is a good which a country sells abroad.

Today's lesson will be split into three parts and we'll begin by focusing on the problems with the US economy in the 1920s.

The US economy was booming in the 1920s, the overall size of the economy was growing.

People's individual incomes were rising, and employment was growing too.

A key part of the US economic boom was the stock market.

The most important stock market in the US was based in New York on Wall Street.

In 1929, the Wall Street stock market crashed.

Despite the boom, there were actually several problems with the US economy in the 1920s that helped lead to this crash, including speculation, over production and foreign tariffs.

So we are going to focus on each of these problems in turn.

So let's begin by focusing on speculation and how that affected the US economy.

During the 1920s, buying shares in American companies had become increasingly popular in the USA.

Many people viewed it as an almost guaranteed way of making money.

This was because as company profits increased, the value of shares continued to rise too.

Whereas four million Americans owned shares in various companies in 1920, this had increased to roughly 20 million by 1929.

The largest shareholders were usually rich bankers and industrialists, but many ordinary Americans also purchased their own shares.

A large number of the Americans who began playing the stock market in the 1920s were speculators who became involved by buying on the margin.

This allowed people to pay just 10% of the cost of a share, whilst borrowing money from banks to cover the rest of the cost.

Buying on the margin led to investors building up large private debts to banks.

Nevertheless, rising share prices throughout the 1920s gave speculators confidence that once the value of their own shares had increased, they could sell them off, pay back their debt to the bank and still have a profit left over for themselves.

Speculation helped accelerate the increase in share prices.

However, speculation also meant that by late 1929, many companies had actually become overvalued on the American stock market.

So let's make sure we have a secure understanding of what we've heard so far.

Why can speculation be considered a form of gambling? Is it because speculators did not know if they would be able to afford their shares, because speculators did not know whether their shares would rise or fall in value, or because speculators did not know what companies they were buying shares in? Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said the correct answer was B, speculation could be considered a form of gambling because speculators did not know whether their shares would rise or fall in value.

Although in the 1920s, many investors did believe that share prices would just continue to rise and rise in value.

And let's try another question.

This time we have a statement that reads, buying on the margin led to many speculators developing large debts.

Is that statement true or false? Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said that that statement was true, but we need to be able to justify our response.

So two justifications have appeared on the screen.

The first says that buying on the margin relied on 90% loans from banks to purchase shares.

And the second says that speculators could only buy on the margin for shares in the worst companies, which often went bust.

So which one of those two justifications is correct? Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said the correct justification was A.

Buying on the margin relied on 90% loans from banks to purchase shares.

So the many speculators who did buy on the margin ended up building up large debts to American banks.

Another major problem at the American economy in the 1920s was overproduction.

A key part of the economic boom in the USA had been the mass production of consumer goods like radios and cars.

Mass production had lowered the cost of making these goods with lower prices then meaning more consumers could afford them while still allowing companies to achieve even greater profits for themselves.

However, many Americans was still too poor to afford these products and there was a limit on how many of these consumer goods other Americans would be willing to buy.

As a result, in the late 1920s, American factories began suffering from a problem which had affected US agriculture throughout the 1920s, overproduction.

Mass producing factories were manufacturing more than they could sell.

Subsequently, the huge profits, which many American businesses had enjoyed during the 1920s began to shrink in size as their sales started to decline.

So let's make sure we have a secure understanding of the problem we've just heard about.

Which of the following situations led to industrial profits declining in the USA? Was it that the quality of mass produced goods declined? The demand for mass produced goods exceeded supply, or the supply of mass produced goods exceeded demand? Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said that the correct answer was C.

The supply of mass produced goods exceeded demand by the late 1920s.

And this meant that industrial profits began to decline in the USA.

In other words, the manufacturing sector, just like farming, had throughout the 1920s began to suffer from the problem of overproduction.

Foreign tariffs provided an additional problem for the US economy.

By the end of the 1920s, Republican lawmakers and governments had introduced new tariffs during the 1920s to protect US producers from foreign competition.

For example, in 1922, the American government introduced new tariffs on foreign goods sold in the USA to encourage people to buy more American products.

However, these tariffs encouraged France, Germany, Italy, and other European countries to significantly increase their own tariffs on American exports over the next five years, this increased the price of US exports, making it harder for American companies to sell their surplus goods abroad.

In 1928, after France doubled its tariff on American car exports, Henry Ford made it clear that he opposed the US government's tariff policy, arguing that it was causing more harm than good for American car manufacturers like him.

So let's make sure we have a secure understanding of what we've just heard.

I want you to write the missing keyword in the following sentence.

US businessmen such as Henry Ford opposed the US government's blank policy.

So what's the missing key word? Pause the video here and press play when you're ready to see the right answer.

Okay, well then to everybody who said that the missing key word was tariff.

US businessman such as Henry Ford oppose the US government's tariff policy.

Ford said that the US government's policies were doing more harm than good for American car manufacturers like him.

And let's think about this in a little bit more depth.

How are the problems of tariffs and overproduction linked? Was it that foreign tariffs force US companies to overproduce to try and still make profits, that foreign tariffs led US companies to prioritise foreign demand for their goods over US demand, or that foreign tariffs stopped US companies from exporting the surplus goods US customers would not buy.

Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said that the correct answer was C.

We can see that there are some links between the different problems the American economy faced in the 1920s, for example, with foreign tariffs introduced, it was harder for US companies to export their surplus goods which US customers were not buying.

And this exacerbated the problems of overproduction that they were facing.

So we're now ready to put all of our knowledge into practise.

I want you to match each of the problems shown on the left hand side with the correct description of how they affected the US economy on the right hand side.

So pause the video here and press play when you're ready to check your answers.

Okay, well done for all your hard work on that task.

So I asked you to match each of the problems with the correct description of how they affected the US economy.

Thinking about foreign tariffs as our first problem, you should have matched that up with the description that says, US companies found it harder to export their surplus produce abroad for overproduction.

You should have matched that up with the description that said profits fell in agriculture and industry as sales failed to keep up with output.

And so for speculation, you should have matched that up with the description that said people built up large debts as they gambled that share prices would increase.

So really well done, especially if you got all of those problems matched up their correct descriptions.

And now we're ready to move on to the second part of our lesson where we are gonna focus on what was the Wall Street crash? In 1929, the most important American stock market, located on Wall Street, crashed.

The Wall Street crash demonstrated the dangers of speculating on the stock market.

The Wall Street crash occurred in stages.

First, there was a decline in company profits, then cautious shareholders began to sell off their stocks.

Then there was a market panic.

Black Thursday was a key event that represented this market panic.

And finally, Black Tuesday occurred, followed by continued panic in the American stock market and in its wider economy.

So let's think about each of these stages of the Wall Street crash in a little bit more depth.

By late 1920s leading American companies were still making money, but their profits were falling.

In September, 1929, a few cautious shareholders began to sell their shares.

They were worried that these shares would begin to lose their value if they kept holding onto them.

So let's reflect on what we've just heard.

What encouraged some investors to begin selling off their shares in September, 1929? Was it that they lost confidence that companies would continue to increase their profits? Was it that they could no longer afford to purchase new shares? Or was it that new restrictions were introduced, limiting the amount of shares people could own? Pause the video here and press play when you're ready to see the right answer.

Okay, well then to everybody who said that the correct answer was A.

Some cautious shareholders began selling off their shares in September, 1929 because they lost confidence that American companies would continue to increase their profits.

If the profits didn't continue to increase, then the value of the shares in those companies would begin to fall.

And that's why those cautious shareholders began to sell off their own shares.

News of investors beginning to sell shares caused panic in the stock market.

Other shareholders began to worry that their own stocks might start to lose value.

Shares were only valuable if someone else would buy them.

So nervous investors preferred to have cash rather than shares.

Shareholders had to drop their selling prices in order to find buyers who would give them cash in exchange for their shares.

The 24th of October, 1929 became known as Black Thursday.

13 million shares was sold on Wall Street.

That was five times the daily average.

Almost all companies suffered a fall in their share price as desperate investors kept lowering the price of their shares in order to find some buyer who would give them cash in exchange for them.

So let's make sure we have a clear understanding of what we've just heard.

I want you to write the missing word in the following sentence.

Because of widespread panic selling, the 24th of October, 1929 became known as Blank Thursday.

So what's the missing word? Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said that the missing word was black.

Because of widespread panic selling, the 24th of October, 1929 became known as Black Thursday.

On that single day, 13 million shares was sold on Wall Street, five times the daily average.

Tuesday the 29th of October proved even worse than Black Thursday.

It therefore became known as Black Tuesday.

16 million shares was sold by shareholders, and because of this, the price of leading American companies collapsed.

If we compare share prices from the 3rd of September, 1929 to the 13th of November, 1929, after Black Thursday, after Black Tuesday, we can see a significant drop.

For example, share prices in US steel fell by 46%.

Share prices in General Motors, a leading manufacturer fell by 80% and share prices in the Radio Corporation of America fell by a staggering 94% in just over two months at the end of 1929.

So let's think about what we've just heard.

We have a statement on the screen that says, black Thursday was the worst moment of the Wall Street crash.

Is that statement true or false? Pause the video here and press play when you're ready to see the right answer.

Okay, well then to everybody who said that, that statement was false, but we need to be able to justify our response.

So two justifications have appeared on the screen.

The first says that even more shares were sold on black Tuesday, the week after black Thursday.

And the second says that even more shares were sold on black Tuesday the week before black Thursday.

So which one of those two justifications is correct? Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said that justification A was correct.

Even more shares were sold on Black Tuesday the week after Black Thursday, whereas 13 million shares were traded on Black Thursday, which was already five times above the daily average on Black Tuesday, five days afterwards, this rose to 16 million shares.

So we're now in a good position to put all of our knowledge into practise.

For Task B, I'm gonna ask you to answer two questions.

Firstly, I want you to identify the missing two events from the following chronological summary of the Wall Street crash.

So pause the video here and press play when you're ready to check your answers.

Okay, well done for all of your effort on that task.

So I asked you to identify the missing two events from the following chronological summary at the Wall Street crash.

For the first missing event, you should have said that company profits began to decline.

This was followed by cautious shareholders selling off their own shares, and that in turn helped trigger a market panic.

The next missing event, which you should have written in, was that Black Thursday occurred, a single day when 13 million shares was sold on Wall Street, followed just five days later by Black Tuesday and continuing market panic.

So really well if you got both of those events identified correctly.

And so now we can move on to the second part of Task B.

Herbert Hoover became President of the United States in January, 1929.

I want you to study Hoover's prediction about the future of the USA.

He said, "I have no fears for the future of our country.

It is bright with hope." So I want you to explain how the Wall Street crash proves that President Hoover's prediction made at the start of 1929 was mistaken.

Pause the video here and press play when you're ready to reflect on your response.

Okay, well, for all your hard work on that task.

So I asked you to explain how the Wall Street crash proves that President Hoover's prediction was mistaken.

Your answer may have included The Wall Street crash proves that President Hoover was over optimistic about the future of the USA when he became president at the start of 1929, Hoover said, "I have no fears for the future of our country." However, by the end of the year, falling investor confidence in the US economy had triggered the Wall Street crash.

Unlike during the rest of the 1920s share prices plummeted, for example, shares in the Radio Corporation of America fell by 94% as a result of the Wall Street crash.

So really well done if your response look something similar to that model, which we've just seen there.

So now we're ready to move on to the third and final part of our lesson for today where we are gonna focus on the effects of the Wall Street crash.

The Wall Street crash had a significant impact on the American economy.

By the end of 1929, millions of Americans had been affected, and this number continuously grew larger.

The Wall Street crash was devastating for shareholders, in their desperation to sell off shares in return for some cash, millions of investors suffered huge losses, on Black Tuesday alone, the 29th of October, 1929, shareholders lost $8 billion.

The financial losses of shareholders created even greater issues.

Many shareholders had been speculators who purchased their shares on the margin.

They had relied on bank loans to make their purchases and were relying on making profits to pay back their loans and still keep a profit for themselves.

However, once share prices had dropped, speculators found that they did not have the money to cover their debts.

When lots of customers proved unable to repay their debts, it led to entire banks going bust.

This was when banks no longer had enough money to keep operating.

In fact, 659 banks went bankrupt.

They were unable to pay their debts, in the USA in 1929 alone, by December, 1930, the banking crisis had become so pressing that one of America's biggest banks, the Bank of the United States, also went bust.

In 1931, a further 2,294 banks closed.

The money which banks had loaned out to speculators had been taken from the bank's saving accounts.

Once banks began to fail, this meant that savers lost all of their money too.

When the bank in the United States went bust, 400,000 people lost everything which they had kept with the bank.

In this way, the Wall Street crash very quickly began to affect Americans who had never even been involved in the stock market themselves.

Okay, so let's make sure that we've understood everything that we've just heard.

How much did shareholders lose during the Wall Street crash? Was it $8,000, $8 million or $8 billion? Pause the video here and press play when you're ready to see the right answer.

Okay, well done to everybody who said the correct answer was C, shareholders lost $8 billion during the Wall Street crash.

So let's try another question.

This time we have a statement which reads, "Only those involved in playing the stock market were affected by the Wall Street crash." Is that statement true or false? Pause the video here and press play when you're ready to see the right answer.

Okay, well then to everybody who said that that statement was false, but we need to be able to justify our response.

So two justifications have appeared on the screen.

The first says that banks who loaned money to speculators failed, wiping out the savings of their account holders.

The second says that the government increased taxation for all Americans in order to provide support for bankrupted shareholders.

So which one of those two justifications is correct? Pause video here and press play when you're ready to see the right answer.

Okay, well, and to everybody who said the correct justification was A, banks who loaned money to speculators failed, wiping out the savings of their account holders.

In fact, 659 banks went bankrupt in 1929 alone.

And in December, 1930, when the Bank of the United States went bust, it wiped out the savings of 400,000 people who kept their accounts with them.

So we are now ready to put all of our knowledge and understanding of the effects of the Wall Street crash into practise.

I want you to answer the following question, in what ways were the lives of Americans affected by the Wall Street crash? You should write two paragraphs outlining different impacts which the Wall Street crash had on Americans.

So pause the video here and press play when you're ready to reflect on your response.

Okay, well done for all of your effort on that task.

So I asked you, in what ways were the lives of Americans affected by the Wall Street crash? Your answer may have included, one way the Wall Street crash affected American lives was by bankrupting speculators.

During the crash market panic had led shareholders to sell their stocks at increasingly lower prices.

For example, share prices in US steel fell by 46% between September and November, 1929.

While share prices in a Radio Corporation of America fell by 94%, many speculators had purchased their shares by buying on the margin, leaving them with debts, which they hoped rising share prices would help them pay off.

However, by selling their shares at lower prices during the crash, many speculators were left without the cash to repay their debts, and so they were bankrupted.

So well done if one of your paragraphs looks and think similar to that model there.

Your answer may also have included, one way the Wall Street crash affected American lives was by wiping out the savings of many ordinary Americans, many American banks had provided loans to speculators to help them buy shares on the margin.

However, as the crash bankrupted, many speculators, large numbers failed to repay their debts, leading banks to go bankrupt.

For example, 659 banks failed in 1929 and one of the USA's biggest banks, the Bank of America went bust in 1930.

Once these banks went bust, ordinary Americans who held accounts with them lost all of their savings.

When the Bank of America failed, this wiped out the accounts of 400,000 savers who had used the bank.

So really well done your own response.

Look something like there's two models which we've just seen.

So now we've reached the end of today's lesson, which puts us in a good position to summarise our learning.

We've seen that speculation led to increases in private debt and share prices became overvalued.

American goods were overproduced in the US, but Tars made them too expensive to sell in European markets.

Declining confidence in the US economy led to the Wall Street crash when share prices plummeted and many speculators were bankrupted.

The Wall Street crash triggered the collapse of 659 banks in 1929 alone, and bank failures hurt millions of Americans, even those who had not been involved in the stock market.

This is so really well done for all of your work throughout today's lesson.

It's been a pleasure to help guide you through our resources, and I look forward to seeing you again in future as we think further about the bust years in the USA.

And really question, how did the Great Depression affect the lives of the American people?.