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Stock Market Crash
Transcript of Stock Market Crash
Crash Before the Crash By the end of WW1, the nation had become a
new era full of entuhsiasm, where anything seemed possible. The culture was rapidly changing, and America was rapidly expanding. There was much confidence in America's economic system, and many people invested in the stock market-- trying to get rich quick. During the Roaring 20's, it seemed that nothing could touch the new ways people lived. Huge economic prosperity was taking place in America and people were spending money very freely. Many took advantage of the stock market and invested much of their savings to it, thus causing the stocks to rise immensely. It was the new hot topic, but not everyone could afford it. For instance, if you were to buy a stock that was $10, you would only have to pay one or two dollars while the broker paid eight or nine dollars. People didn't realize this was a risky move because if the stock market didn't do well, the investor had to pay back not only their down payment of one or two dollars, but also the rest of the eight or nine the broker paid for them. Because so many people were confidently investing in the market, big companies and banks began investing as well. On March 25, 1929, a mini-crash and larger margin calls were issued. This caused a panic and many started rapidly selling. However, a banker, Charles Mitchell told people that his bank would continue to lend, easing the tension and letting the dust settle. By the spring of 1929, more signs were brought to the forefront, with steel production going down, real estate slowing, and low car sales. Facts Value of the market dropped 12.8%
Market lost approximately $14 billion
16.4 million shares of stock changed hands on this day, a record time.
Dow Jones Industrial Average closed at 230.07 points Signs of the Crash Terms "Boom" when the overall value of stocks climbs steadily upwards, creating high stock prices and a high Dow Jones Industrial index. The main reason reason for a "boom" is people buying shares of stock more than they are selling. "Crash" when the overall value of stocks falls steadily and rapidly, creating low stock prices and a low DJIA index. The main reason for crashes is people are selling shares of stock than they are buying Main Reasons 1. Overvalued stocks
2. Margin Buying
3. Poor moves by federal reserve
4. Poor banking structure
5. No insurance and no safety nets in American economy. Ex. social security, welfare, insurance, and unemployment. After the crash, the suicide rate increased rapidly. Many people jumped out of buildings to their death because that was less painful than facing financial debt. The most suicides occured in 1930, the year after the crash. In 1925, the number of suicides in New York was 14.4 per 100,000 of the population. In 1934, that number increased to 17.0 per 100,000 of the population. Suicide Rates Black Tuesday:
On Tuesday October 29th, 1929, The DJIA fell 13% which was a catostrophic event that is now refered to as "Black Tuesday". This day is not fully understood and is highly controversial in the economic world. It is said that investors decided to run from the market and never return. This day is recongnized as the beginning of the Great Depression. Between September and "Black Tuesday" the market lost a total of 40%. This was the mark of Wall Steet's crash that would continue to fall for several years.
By 1933, more than 13 million Americans were out of work, tens of thousands of businesses had failed, and farm foreclosures grew. In October 1930, Hoover established the President's Emergency Committee for Employment to coordinate the efforts of local welfare agencies. Hoover tried to simulate the economy again by creating the following acts:
-The Reconstruction Finance Corporation-provided railroads, banks, and other financial institutions with money for loans.
-The Glass-Steagall Act- made getting commercial credit easier and released $750 million in gold reserves for additional business loans.
-The Emergency Relief and Construction Act-provided funds to the RFC to make loans for relief to the states and included additional money for local, state, and federal public works projects.
Because people stopped investing, companies stopped having the money to produce and were forced to lay off many workers. With the lack of jobs, a lot of Americans became impoverished and could not support themselves or their families. "Bull" a prosperous market, constantly going up, during a boom The
Great Depression Economic downfall spread across the world, and hit Germany the hardest. Adolf Hitler took advantage of the weak country to gain control and enforce Nazi ways. When WWII started, America's economy finally made the recovery it needed with new jobs and patriotism. the
end Since everyone was buying stocks, those who could not afford it decided what they called buying on the "margin". What this meant was the investor would put a down payment on the stock that was 10-20% and a broker would pay the rest of the 80-90% of the stock.