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The Causes and Effects of the Stock Market Crash of 1929
Transcript of The Causes and Effects of the Stock Market Crash of 1929
Too much industry overproduction- surplus goods were not being purchased.
Too many products not, enough consumer buying
80% of the population had no savings Economic Danger Signs Banks were not insured
.No government agencies monitored banks or the Stock Market- Laissez Faire/Republican Presidents
Market value based on borrowed money and over speculation instead of real value What is a Stock Market Crash? The steep fall in the prices of stocks due to widespread financial panic. Prior to the crash many Americans experienced great wealth and excess because of the stock market.
Inflation was low while at the same time real income and production were both rising at over 3% per year.
Several companies were increasing their dividend payouts.
The Warning Signs Farm prices drastically fell after WWI
Farmers were paid by the government to make food for allies, creates huge surplus
Farmers were unable to repay loans after government pulls WWI agricultural contracts
6,000 banks close out West
President Hoover vetoesd all bills to help farmers
Laissez Faire Black Tuesday 1.October 29th, 1929
2. On Black Tuesday, a record 16.4 million shares exchanged hands.
3.Stocks plunge again
4.Value of market falls
5.People sell what is left to get some money Intermediate Effects of the Crash 1.Many lost their life savings in the market crash
2.Banks and brokers call in loans- American people have no money Unemployment 1.The closing of factories led to millions of layoffs. This sharp increase in the unemployment rate was the most obvious symptom of the Greats Depression 2.Many industries that were able to stay open were forced to decrease their overall production.
Turned full time employees into part-time employees or laid-off a portion of their workforce.
Unemployment More Economic Danger Signs Black Thursday
October 24th, 1929
Stocks fall drastically
Brokers panic and make make margin calls
No one can pay them
On Black Thursday, a record 12.9 million shares were exchanged. Financial Collapse 1.Stock Market signaled the beginning of the Great Depression. (1929-1940)
2.Economy plummeted and unemployment skyrocketed.
3.However, the crash did not alone cause the Great Depression. 6.By the end of October, over $30 billion had been lost
7.Thousands lose everything 3.Hundreds of banks close
No money was left to pay back loans= empty savings accounts
Bank were not prepared for people to withdrawal their money at the same time
c.No bank insurance
d.9 million savings accounts vanish Black Tuesday After the Stock Market Crash, people rush to the banks to salvage their life savings. Before the Stock Market Crash of 1929 Increase in personal debt-(Credit debt and installment plan debt).
Buying Stocks on Margin- borrowed money from Stock Broker to purchase Stocks. Thursday of October 24th, 1929 was the first major drop in the stock market. A business shares its assets and earnings with the general public to acquire money. The 1920's post WWI era was one of tremendous growth, optimism, and prosperity.
Americans had returned victorious and optimistic from the first World War.
Industries had been greatly expanded to help support the war effort, and these helped establish capital to fuel the growth in the 1920's.
Wages up 40% after WW1
-The market bottomed out in July 1932, when the Dow hit 41 from a high of 381 in 1929.
-Even as the market started to rise in 1932, it would take another 22 years before the Dow would climb above the levels seen in 1929. Results \ Intermediate Effects of the Crash