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Stock Market Crash of 1929
Transcript of Stock Market Crash of 1929
Public Official Statements
Imbalance between Production & Consumption
Stock Market Crash Of 1929
The Wall Street crash was the U.S Stock Market crash of October 29, 1929. Which precipitated a world wide collapse of share values and triggered the Great Depression.
Was the most devastated economic crash in U.S history.
10 years of economic slump with catastrophic levels of unemployment across all the industrialized countries.
Buying on Margin.
Unbalance between Production and Consumption.
Weaknesses in the Banking System.
Public officials Statements
Buying on Margin
Buying on margin, as defined by the stock market, means borrowing money from a broker to purchase more stock than you are usually able to afford.
Buying shares on the margin was practiced, just like buying credit.
Meaning that you had to pay 10%-20% of the value of the shares and that meant you were borrowing 80%-90% of the value of the shares.
This made investors " margin millionaire", making huge profits buying on margin and watching share prices rise.
Thus making the "margin millionaires go overexposed when prices fell.
Therefore "margin millionaire" got wiped out when the market crash.
In the 1920s there was a stride in production techniques, especially industries like automobiles.
The production line enable economies of scare and great increases in production.
The demand of buying expensive cars and consumer goods were struggling to keep up.
Therefore bu the end of the 1920s firms were struggling to sell all their production.
1929 before the American Agricultural sector was struggling to maintain profitability.
Small farmers were driven out of business, since they could not compete in the new economic climate.
Technology was increasing supply, but demand for food was not increasing at the same rate.
Many public officials commented that the stock prices were too high.
E.g: President Herbert Hoover, stated that stocks were overvalued and that speculation hurt the economy.
Hoover's statement suggested to the public the lengths he was willing to go to control the stock market.
Before the Great Depression American banking system was characterized by having many small to medium sized firms.
America had about 30,000 banks.
The effects of this was that they were prone to going bankrupt if there was a run deposits.
Many banks in rural areas went bankrupt due to agricultural recession.
Weaknesses in the Banking System
President at the time was a republican,
Herbert Hoover- he believed that if you got in trouble you should help yourself instead of getting help from others.
He called this "rugged individualism"
Therefore he didn't do much to help those without jobs during this time.
12 million people out of work.
12,000 people being made unemployed every day.
People sell what is left to get some money.
Unemployment meant fewer customers; a decrease in customers caused further cutbacks in production; these cutbacks, in turn, resulted in more unemployment.
But the industrial workers and the farmers suffered most. Most wage earners had no savings to tide them over a period of unemployment.
80% of the population had no savings.
Banks were not insured.
No government agencies monitored banks.
.Banks and brokers call in loans
Bank were not prepared for people to withdrawal their money at the same time.
9 million savings accounts vanish Black Tuesday After the Stock Market Crash, people rush to the banks to salvage their life savings.
1616 banks had gone bankrupt.
Too much industry overproduction- surplus goods were not being purchased.
Too many products not, enough consumer buying.
Many industries that were able to stay open were forced to decrease their overall production.
Industries had been greatly expanded to help support the war effort, and these helped establish capital to fuel the growth in the 1920's
"Stock Market Crash of 1929." About.com US Economy. N.p., n.d. Web. 22 Jan. 2014.
"Stock Market Crash of 1929." History.com. A&E Television Networks, n.d. Web. 24 Jan. 2014.
"Stock Market Crash of 1929 Causes, Effects and Timeline." Stock Picks System. N.p., n.d. Web. 23 Jan. 2014.
"The Impact of the Stock Market's Crash on Rural America." The Impact of the Stock Market's Crash on Rural America. N.p., n.d. Web. 22 Jan. 2014.
BY: IZZY PHILLIPS