Stock Crash Fallout
Let's go back to the principal story. Now that the principal has given a lot of money out (with the intention of making more money with people paying him back more than he gave out). Since that didn't happen, he is now out of money.
Making matters even worse is that he has bills to pay! He has a mortgage (house bill) energy bill, water bill, cell phone bill, student loans, car payment, and insurance. Not to mention food. When he looks at the amount of money he has to pay to others, he realizes that there is no way that he will be able to pay for it.
What's the result? Bankruptcy.
To put it simply, he can't afford it. So his operation of giving money to others is now completely and totally over.
This is what happened during the Great Depression. Instead of a principal giving out money, it was banks! Banks were loaning out money to people with the intention of making money as people would have to pay back more than they borrowed (this is called paying interest).
Banks gave out more than they had. When they ran out of money, they couldn't pay back their bills, nor could they pay people who were asking to take money out of their accounts. Therefore, almost 50 percent of the nation's banks fell apart. ----->
Know what that means? People who had money in their bank accounts went to get some and learned that banks couldn't afford to give them it. Therefore, all of the money that you had saved in the bank is now forever gone.
Kaput. Gone. Like, never returning. You thought you were doing well financially, but you were instantly broke. Yikes. Now you're in the same position the principal was. Can't pay bills or additional things that you had grown accustomed to.
It costs money to run a business. If you are the owner, all of the money goes to you. All of it. Then you decide how to distribute that money to others (rent/mortgage, suppliers, employees, taxes, benefits, etc.) You take all of the profits that you made to pay yourself and your employees. What happens when you lose all of your savings? You can't pay your employees anymore. Therefore, you have to let them go.
Unemployment Skyrockets
There was a significant amount of people who lost an enormous amount of money. Therefore, many people had to close their businesses, or at the very least, let a significant amount of employees go just to keep their business alive. Unemployment was as high as 30 percent just a few short years after the Stock Crash in 1929.
Pictures to the right show thousands of people flocking to banks trying to recover their money. However, all of their fears were quickly realized, their money was no longer available to them. Pictures below are called, "Hoovervilles." President Herbert Hoover developed these as a way for families to relocate to recover from their financial shortcomings. This isn't exactly a thing of the past, however. Today, we have places called, "Tent Cities" that publicly house people without a home in larger cities.
Hoovervilles
Public Response
Soup kitchens and people publicly trying to advertise their experience so that they could (potentially) run into the right person and receive a job offer. This was really the first time that there was a growing sense of the idea of a community coming together to help each other out.
During this time, there was no such thing as public assistance. The silver lining of the Great Depression is it paved the way for our government to step in and place systems to help people who are experiencing a myriad of difficulties.
Perfect Storm
The biggest consequence of the Dust Bowl was that crops were absolutely obliterated (picture 5). This is when we go back to our supply and demand conversation. During, and after the Dust Bowl, there was a high demand but an extremely low supply.
What does that mean? If you combine people losing all of their savings during the Stock Market Crash, AND realizing that the price of food has skyrocketed, life was incredibly difficult.
So much so that families had to send their children elsewhere to stay. The Dust Bowl largely affected people in the south. Families realized they did not have the means to provide for their children, so they had to send them away. Desperate times call for desperate actions, and many people did whatever they could to survive.
Coincidentally, and at the WORST time imaginable, our country experienced a great deal of adversity with a series of natural disasters. One might think a tornado or a hurricane would be the case, but it was actually dust that caused it.
It was so bad that people suffocated from inhaling dust. It was very dangerous, and it caused a significant amount of respiratory issues. That's why the last picture shows women modeling "Dust Masks." Crazy times.
