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What Caused The Wall Street Crash?

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gabby craft

on 22 January 2014

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Transcript of What Caused The Wall Street Crash?

What Caused The Wall Street Crash?
By Livy Parkes, Beth Ibbotson and Gabby Craft
Main Causes of the Wall Street Crash
During the 1920s, America experienced a massive boom in the economy. This led to many people purchasing shares in the stock market. There were many factors which contributed to the crash, one of which was the rise in shareholders and the consequences they caused, and in this presentation we will tell you more about what caused The Wall Street Crash.
Over production by US. industry

The market for the consumer goods was mainly the rich and middle-class, therefore, by the end of the 1920s, those who could afford to buy the goods had already bought them. However, the industries continued to produce the same amount of goods, and so when sales decreased, industries had to make cuts such as reduce the number of workers, as well as reducing the production number. So, the number of unemployed grew, so people become poor again. The demand for the products was gradually decreasing, so the industries decreased in value so the share prices went down.
Actions of Speculation
Many Americans thought of the stock market as a quick and easy way to get rich; buy shares, watch them rise in value and then sell them at a higher price. In the early 1920s, this was ok, as there were more share buyers than sellers so the value of the shares rose. Many Americans decided to join the stock market, in 1920, there were 4milllion shareholders, but in 1929 there were 20million shareholders. Many of the shareholders were speculators, and many of them got loans and bought shares 'on margin', so they only had to borrow a smaller amount than the shares were worth. In 1928, speculation was at an all-time high, and even the banks were speculating. But in September 1929, people started to expect a crash as factory outputs had already started declining in june. The stock prices start to drop in October, but the banks intervene and confidence is restored But only a few days later, there is a huge fall and people sell their shares for whatever they can get.
Decision by banks not to support share prices

In the fall of 1929, the factory outputs in America started declining, and everybody started to realise that the stock prices were going to drop soon. In late October 1929, the stock prices began to fall, and everyone began to sell their stocks. For 1 day, the bank intervened to stabilise the stock prices, but on monday the 28th of October, the banks made it clear they were not going to help. So this meant the stock prices plummeted without the banks' supported. If the bank had supported them the wall street crash would have not been quite so bad, or maybe have been averted.
The End! Thank you for watching!
• Poor distribution of income between rich and poor
• Over production by US industry
• Actions of speculation
• No export market
• Decision by banks not to support share prices

Poor Distribution of income between the rich and poor
During the boom in America in the 1920s, many people got a lot more money through increase in jobs and speculation on the stock market. However, this was not the story for everyone. The boom was consumer-led, but 42% of the population were still too poor to buy these goods, and the Republicans policies to not interfere, also included doing nothing about poverty and unemployment. Moreover, with the worker's wages not increasing and prices not falling, the demands for goods grew, but industries didn't, which led to share prices falling on the stock market.
No Export Market
In The late 1920s, when the industries started to produce more goods than it was necessary for the American population, usually, they would have exported their goods to countries overseas. However, people in Europe could not afford American goods after the war, and, in addition, after nine years of American tariffs, Europe had put up their own tariffs to protect their own industries. This all meant that America was stuck with their surplus amount of goods, and had nobody to sell them to. This meant that the products became less desirable, therefore, the stock prices decreased.
So, as you can see, there were many main factors which contributed to the Wall Street Crash; the poor distribution of income between the rich and poor, over production by US. industry, actions of speculators, no export market and the decision made by banks not to support share prices. If the Republican goverment had to been so lax in their support to America, the crash could have been avoided, as many of these things would have not happened if the goverment had been keeping an eye on things. The president at the time was Herbert Hoover, and after the crash many people blamed him for the crash as he didn't intervene to try to avoid the crash.
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