1. False Prosperity

• overdependence on mass production, consumer spending, advertising, welfare capitalism, high tariff, "invisible hand"
  
• automobile was the leading industry
  
• chemicals, appliances, radio, aviation, chain stores
  
• overproduction in textiles, farming, autos
  
• real wages increased only 11%
  
• 60% population less than $2000 poverty minimum
  
• top 5% earned 33% income - spending by the rich essential
  
• Andrew Mellon cut taxes
  

2. Speculation

• Fed loaned at 3.5%, gold inflow 1927, Great Bull Market 1928
  
• broker loans on call rose from $3.5b in 1927 to $8.5b in 1929
  
• Goldman Sachs investment trusts, 50% margin trading at 5% interest
  
• only 1.5m of 120m population were investors
  
• pooling tactic of "anglers" - John J. Raskob
  
• Charles Mitchell of National City Bank: "I know of nothing fundamentally wrong with the stock market." (Oct. 21, 1929)
  
• Joe Kennedy: "Only a fool holds out for the top dollar" (sold after RKO merger in October 1928)
  

3. Stock Market Crash

• Sep. 3 Dow high of 381
  
• Sep. 6 Babson break - market became erratic
  
• Sep. 20 - collapse of Hatry in Britain
  
• Oct. 23 - J.P. Morgan buys to stop price decline
  
• Oct. 24 - panic selling began - 12.8m shares
  
• Oct. 29 - "Black Tuesday" - 16.4m shares
  
• prices decline to Dow low 41.22 on July 8, 1932
  

4. Banking Crisis

• deposits withdrawn, deflation
  
• 9000 banks fail in 1930, 1932 waves
  
• Austria's bank failed May 1931
  

5. Unemployment

• ripple effect as leading factories close
  
• rose to 25-35% of total labor force, 80% in Toledo
  
• farm income declined 60%; 1/3 lost land
  

6. Trade Collapse

• foreign countries retaliate with high tariffs
  
• Weimar Republic unable to pay reparations or U.S. banks loans
  
• U.S. had been creditor with $638m annual surplus
  

7. Republican Policy

• "The Ordeal of Herbert Hoover"
• laissez faire, balanced budget, trickle down, voluntarism
  
• no use of monetary or fiscal policies
  
• Agricultural Marketing Act, Hawley-Smoot tariff, RFC of Jesse Jones
• Three Little Pigs