Business Failures 1920-1932

By: Natalie Hinson, Carina Zhao, Uzair Javaid, Mohit Joshi

The Start of The Great Depression

The start of the Depression is usually remembered by the stock market crash of “Black Tuesday,” Oct. 29, 1929, when the Dow Jones Industrial Average fell almost 23%and the market lost over $8 billion in value. This time period was marked by extreme market volatility that exposed those who had bought stocks “on margin” — with borrowed money.
The Great Depression
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How the Great Depression Affected Businesses

By 1932 the unemployment rate had soared past 20%. Thousands of banks and businesses had failed, leaving many homeless. People returned home after hopeless job hunts to find their dwellings padlocked and their possessions and families turned into the street. Many lived at the edges of cities in makeshift shantytowns their residents derisively called Hoovervilles. People foraged in dumps and garbage cans for food.

Facts About the Great Depression

- Most bank failures occurred in rural areas

- Less banks meant less money to be loaned to industries

- Companies forced to pay workers less, pay cuts averaged 18% in 1932

- Production faltered, workers were laid off, and many were forced to close

- Failure rate skyrocketed to 127 out of every 1000 businesses (12.7%) in 1930-1933

- Total value of goods produced decreased from $104 billion to $56 billion

- Business failure caused massive unemployment, from 9% in 1930 to 25% in 1933

Aftermath and Recovery

In the aftermath of the Great Depression, a lot of things changed. There were 10,000 banks that went out of business. Around one-half of all banks either closed or merged with other banks. The role of the Federal Reserve and government increased. Tighter regulations were put on financial markets and banks. The Federal Reserved shifted to a policy of maintaining high employment and fast growth.


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