Speculation Slides Speculation & Bubbles
The Roaring 20s Stock Market Simulation
DEBIT: 10,000.00
The Offer of a Lifetime
1928 Opportunity
"Everyone is doing it! You'd be a fool to leave your money in a savings account at 3% when the market is growing by 30%!"
1
Your Savings: $10,000
2
Broker Loan (Margin): $90,000
Total Buying Power: $100,000
Buying on Margin
You only need to put down 10% of the price. The broker lends you the rest. If the stock goes up 10%, you've doubled your personal investment!
The Catch?
If the stock drops, you still owe the full $90,000 + interest.
Market Update: Early 1928
TICKER: R-CA 114... GE 138... GM 192...
Radio Corp (RCA)
+25%
The "Internet" of the 1920s. Every home needs one.
Montgomery Ward
+18%
Mass retail is exploding. Everyone is buying on credit.
General Electric
+12%
Electricity is transforming the American home.
Investment Decision
Your $100,000 portfolio is now worth $120,000.
300% GAIN
on personal cash
Market Update: Early 1929
WARNING: PRODUCTION SLOWING...
Economic Warning Signs
Steel production is declining.
Automobile sales have peaked.
Residential construction is down.
"The market is just taking a breather. This is the perfect time to buy more on the dip!"
— Wall Street Analyst, Feb 1929
The Margin Call
The market drops 10% in one week. Your broker is nervous. They want their money back.
You must provide $20,000 cash today to cover your losses, or your stocks will be sold immediately.
Do you have the cash?
The Speculation Loop
Euphoria
Stock prices rise based on excitement, not actual value or profit.
Over-Leverage
Everyone borrows money (margin) to buy in, driving prices even higher.
The Pop
A small dip triggers margin calls. Everyone sells at once. The market collapses.
"The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis."
— President Herbert Hoover, October 25, 1929 (4 days before the crash)
Speculation Log Worksheet The Speculation Log
Lesson 1: Market Simulation
11th Grade US History
Investor Name:
Date:
Your Personal Cash
$10,000
Margin Loan (90%)
$90,000
Total Initial Portfolio Value: $100,000
1
Round 1: The Bull Market (1927-1928)
Stock Choice Initial Value Change (%) New Value Portfolio Total $100,000 +20%
Your Profit in Round 1:
How do you feel about your investment?
2
Round 2: The Correction (Early 1929)
The market takes a sudden dip. Your broker issues a margin call.
Market Event New Portfolio Value Debt Owed Actual Equity -15% Decline $90,000
Critical Analysis:
If your equity falls below $10,000, you are now broke. If it falls below zero, you are in debt. Based on the math above, what is your current status?
Exit Analysis
1. Define "Buying on Margin" in your own words. Why was it attractive to average people in 1928?
2. How did borrowing money to buy stocks make the market crash more severe than if people had used their own cash?
3. Predicting Next Steps: When people lose their life savings in the market, how does that affect local businesses like grocery stores and car dealerships?
Speculation Teacher Guide Speculation Simulation
Teacher Guide & Facilitation Script
Lesson
01
Objectives
Model the mechanics of 1920s margin trading.
Experience the psychological transition from euphoria to panic.
Identify how debt-based speculation creates market fragility.
The Hook
"Imagine you make $1,500 a year working in a factory. Today, I'm giving you $10,000—nearly 7 years of salary. But wait, I'll give you $90,000 more if you promise to give it back later. You now have $100,000. In one year, that could be $200,000. Are you in?"
Simulation Script & Rounds
Phase 1: 1928
The Bull Market Euphoria
Instruct students to record their starting totals ($10k cash / $90k debt). Announce the following updates with excitement:
"Radio Corp is up 25%! Everyone is buying a radio! RCA is the future!"
"General Motors is up! Construction is booming! You're making money in your sleep!"
Math Check: $100k + 20% = $120k. Equity = $30k (Personal cash tripled!)
Phase 2: 1929
The Nervous Peak
The atmosphere should shift. Speak lower, more seriously. Read these 'news bulletins':
"March 1929: Federal Reserve expresses concern about excessive borrowing."
"September 1929: The Babson Break. A leading economist warns a crash is coming."
"Early October: Prices start to wobble. The volume of trades is getting frantic."
The Crash
Black Tuesday Simulation
Announce the -15% drop. Have students calculate their new totals. Then, issue the **Margin Call**:
"Your broker is on the phone. The $90,000 you borrowed? They want it NOW because the value of your stocks is dropping too low to guarantee the loan. If you can't pay, they sell everything today at the bottom price. You lose your $10k initial investment AND you still owe the remaining debt."
Debrief Questions
The Psychological Trap:
"Why didn't people sell when the warning signs appeared in early 1929? How does greed cloud economic judgment?"
The Debt Connection:
"How does buying on margin turn a 'bad day on Wall Street' into a 'life-ruining event' for a family?"
Crash Investigation Slides The Big Crash
October 1929: When the Music Stopped
BLACK THURSDAY • BLACK MONDAY • BLACK TUESDAY
Panic on the Floor
The 1929 Collapse
Oct 24: Black Thursday
The first massive sell-off. Bankers try to prop up prices with a $25M injection. It works... for a weekend.
12.9M
Shares Traded
Oct 28: Black Monday
Weekend clarity turns to Monday dread. Margin calls start hitting. Panic selling begins in earnest.
-12.8%
One Day Drop
Oct 29: Black Tuesday
The "worst day in stock market history." Tickers fall hours behind. Prices collapse to zero for many stocks.
16.4M
Shares (A Record)
The Media Reaction
Oct 30, 1929
STOCKS COLLAPSE IN 16,410,030 SHARE DAY, BUT RALLY AT CLOSE
"Wild selling overwhelms exchange... Bankers exert pressure to check downward swing... Losses estimated in the billions."
WALL ST. IN PANIC AS STOCKS CRASH
"Crowds jam financial district as values melt away... Police reserves called to maintain order."
Critical Question
How do these headlines contribute to a "self-fulfilling prophecy"?
If you read this while having your savings in a bank that invested in stocks, what would you do?
The Dow Jones Industrial Average (1928-1930)
1928 Start
SEPT '29 PEAK (381)
OCT '29 CRASH
Total Value Lost
$30 Billion
(Equivalent to the total cost of WWI for the US)
Market Sentiment
Despair
Wait, it gets worse?
If you didn't own stock, you might have thought you were safe.
But the money you put in your local bank?
Next Phase: The Banking Panic
Crash Case Study Worksheet Case Study: The 1929 Collapse
Dossier #1929-OCT
Student Investigator:
Date:
Part 1: The Ticker Tape
Below is a reconstructed transcript of ticker tape symbols from the morning of October 29, 1929.
10:00 AM: GM 72... RCA 82... GE 220... US STEELE 188... MARKET STEADY
Analysis Questions:
1. Which stock lost the most points in just 90 minutes? (Calculate the difference)
2. Why is the note "TICKER BEHIND 30 MIN" extremely dangerous for investors trying to sell?
Part 2: Headline Investigation
Source A: NY Times, Oct 25
"BANKERS GATHER TO HALT MARKET SLIDE; PRICES RECOVER IN LATE TRADING"
Source B: Variety, Oct 30
"WALL ST. LAYS AN EGG"
Compare the tone of Source A and Source B. How did the message change from "managing the problem" to "total disaster"?
Record your comparison here...
The Immediate Aftermath
Complete the chain reaction of the crash based on today's evidence.
STOCK PRICES DROP BELOW MARGIN VALUE
BROKERS ISSUE
INVESTORS ARE FORCED TO...
MARKET VALUE
Final Thought: Why didn't the market just bounce back like it always had before?
Bank Failure Slides Broken Banks
Systemic Failure & Lost Savings
The Money Loop
1. Deposit
You put $100 in your local bank account for safety.
2. Reserve
The bank keeps $10 in the vault (Reserve).
3. Loan
The bank lends $90 to a neighbor for a mortgage or business.
Fractional Reserve Banking
The bank doesn't "hold" your money. It "uses" your money to make loans and earn interest.
The System relies on one thing:
The Anatomy of a Run
!
The Trigger
Rumors spread that the bank lost money in the stock market or that a neighbor couldn't withdraw cash.
!
The Stampede
Hundreds of people line up at once to withdraw their entire savings.
!
The Collapse
The bank runs out of the 10% cash reserve. They close their doors forever.
"The bank isn't a building filled with gold. Your money is in Joe's house, and the Kennedy's farm, and the grocery store down the street."
— George Bailey, It's a Wonderful Life
1930 vs. Today
Then (1930)
No Deposit Insurance (FDIC)
If the bank closes, your money is GONE.
9,000 banks failed between 1930-1933.
Now
FDIC Insurance (up to $250k)
Federal government guarantees your money.
Confidence prevents bank runs.
The Result: Economic Paralysis
When banks fail, they stop making loans.
Zero Trust
Frozen Credit
Dead Economy
Bank Failure Map Worksheet The Causal Map
Lesson 3: Systemic Failure
Tracing the Financial Dominoes
Student:
Period:
Part 1: Mapping the "Bank Run"
Complete the causal chain below by filling in the empty boxes to explain how a rumor turns into a complete bank closure.
STOCKS CRASH;
PEOPLE PANIC &
(Fill in what happens next...)
(Fill in what happens next...)
BANK RUNS OUT OF CASH
TOWNSPEOPLE LOSE
Part 2: Understanding "Fractional Reserve"
1. Why is it impossible for a bank to pay back all its depositors on the same day?
2. In 1930, why did a bank failure in a city affect the local farmers who didn't even use that bank?
Part 3: The Economic Freeze
Explain the "Credit Freeze" below. If banks aren't lending money, how does that prevent a factory from hiring new workers or buying new equipment?
Historical Stat:
By 1933, nearly 1 in every 3 banks in America had failed. Total losses to depositors reached $140 billion (in today's dollars).
Global Contraction Slides Global Dominoes
The World Economy Collapses
Unemployment (1932)
A Worldwide Crisis
25%
United States
12 Million Out of Work
30%
Germany
6 Million Out of Work
22%
Great Britain
3 Million Out of Work
Hawley-Smoot
Tariff Act
Passed in 1930 to "Protect American Jobs" by raising taxes on foreign imports to the highest levels in history.
The Goal
Force Americans to buy American goods by making foreign goods too expensive.
Buy Local!
The Reality (Backfire)
Other countries get angry and pass their own tariffs on American goods.
Global Trade Stops Dead.
The Financial Umbilical Cord
U.S. BANKS
"We need our cash back NOW to cover the crash!"
RECALLING LOANS
EUROPE (Germany)
"We can't pay you. Our economy is still broken from WWI."
When American banks withdrew their money from Europe, the fragile European recovery (Dawes Plan) shattered, leading to mass unemployment and the rise of extremist political parties.
World Trade Fell by 66%
Between 1929 and 1934
Lesson Learned:
In a modern world, no economy is an island.
The Result:
Local failures became a global catastrophe.
Global Ripple Worksheet Global Dominoes Analysis
Case File: L4
Lead Analyst:
Region Assigned:
Classification: CONFIDENTIAL
Part 1: The Tariff Backfire
1. Hawley-Smoot Tariff (USA)
"Purpose: To protect American farmers and manufacturers from foreign competition by raising import taxes."
Identify two immediate consequences of this act:
2. Retaliation (The Rest of World)
"Response: France, Britain, and Germany raise their own tariffs on US-made goods like cars and grain."
How does this "trade war" affect a factory worker in Detroit?
Part 2: The Broken Credit Loop
USA
1924-1928: US LOANS FLOW OUT
1930: LOANS RECALLED (REVERSED)
EUROPE
Analysis: Why was Europe so vulnerable to US economic shifts in 1930?
Part 3: Comparative Statistics
Country Unemployment (1928) Unemployment (1932) Political Shift Germany 8.4% 30.1% Rise of Nazi Party Great Britain 10.8% 22.1% National Government Coalition United States 4.4% 25.0% Election of FDR (New Deal)
Connecting the Dots: How does extreme economic misery lead to extreme political changes?
Synthesis Slides The Final Storm
Synthesizing the Collapse
The Ingredients of Failure
Overproduction
Factories and farms produced more than people could afford to buy, leading to a surplus of unsold goods.
Wealth Inequality
The top 1% owned as much as the bottom 42%. Most Americans didn't have enough income to keep the economy moving.
Easy Credit
People bought cars, radios, and stocks on "installment plans" and "margin," creating a mountain of hidden debt.
Agricultural Distress
Farmers had been in a depression since the mid-1920s due to falling crop prices and heavy equipment debt.
The Downward Spiral
Underconsumption
People stop buying goods because they are in debt or out of work.
Layoffs
Factories slow down production and fire workers to save money.
Total Economic Depression
With fewer workers getting paid, consumption drops even further. The cycle repeats and deepens.
The Elevator Pitch
Can you explain the Great Depression to someone in 2 minutes?
Rule: You must connect 3 of these 5 causes:
Go!
The Final Verdict
"To what extent was the Great Depression an inevitable result of the economic practices of the Roaring Twenties?"
Evidence Based
Synthesized
Defended
Synthesis Project Document The Cycle of Collapse
Final Synthesis Project
Unit: Great Depression
Assignment: Causal Model
Economist:
Submission Date:
I. Diagramming the Storm
In the workspace below, construct a comprehensive flowchart that connects the following terms to show how they collectively caused the Depression. You must draw arrows indicating the direction of cause-and-effect.
Overproduction Margin Speculation Bank Panic Hawley-Smoot Tariff Wealth Inequality Credit Freeze
Synthesis Workspace: Draw Causal Map Here
II. The Final Verdict
Essential Question:
"To what extent was the Great Depression an inevitable result of the economic practices of the Roaring Twenties?"
Develop your thesis: Was the crash avoidable, or was it built into the system of the 1920s? Support your claim with evidence from your diagram on Page 1.
Rubric Checklist
Identifies 4+ primary causes
Explains direction of causality (arrows)
Connects US and Global factors
Defends thesis with specific evidence
Sequence Answer Key Guide Teacher Assessment Guide
Analyzing Economic Instability Sequence
Answer Key
L1 & L2: Market Mechanics
Margin Trading Answer:
Students should explain that margin allowed people to buy more stock than they could afford. The danger is that a small price drop wipes out all equity, triggering a forced sale (margin call) that accelerates the market crash.
Ticker Tape Analysis:
The "TICKER BEHIND" message meant investors didn't know current prices. They were selling based on old data, which created blind panic and meant they often got much less money than they expected.
L3 & L4: Systemic Failure
Bank Failure Chain:
Stock Crash -> Bank Losses/Rumors -> Bank Run -> Cash Reserves Exhausted -> Bank Closure -> Savings Wiped Out -> Credit Freeze.
Global Trade Impact:
The Hawley-Smoot tariff was meant to help Americans but destroyed export markets. When other nations retaliated, US manufacturing and agriculture lost their international customers, worsening domestic unemployment.
Final Synthesis Project Scoring Guide
Criteria Mastery (4) Developing (2) Causal Mapping Diagram clearly links all 6 terms. Arrows show sophisticated logic (e.g., cycle of underconsumption). Diagram links some terms but misses systemic connections or cycles. Evidence Uses specific historical stats (e.g., 25% unemployment, 9000 bank failures) to support the argument. Uses vague generalizations (e.g., "everyone was poor") without specific data. Inevitability Thesis Argues a clear position on whether the Depression was built into 1920s policy. States that the Depression happened but doesn't take a position on its cause or inevitability.
Common Misconceptions to Monitor:
Students thinking the Stock Market Crash *was* the Great Depression (remind them it was just the trigger).
Students thinking banks were "stealing" money (explain fractional reserve banking again).
Students assuming the government had the same safety nets (FDIC, Social Security) that exist today.
