Optimistic mood where everything seemed fine People put savings into stock market hoping to get rich.

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Presentation transcript:

Optimistic mood where everything seemed fine People put savings into stock market hoping to get rich

It was a Bull market

NOT a bear market

market value of all stocks = $27 billion Oct stock values hit $87 billion

NY Stock Exchange crashed Thursday, Oct. 24, 1929

Monday Oct. 28, 1929 Market opens with investors & brokers poised to sell. Everyone is nervous.

Tuesday, Oct. 29, 1929 “The most devastating day in the history of markets” AKA: Black Tuesday

Prices fell so much that ALL gains from previous year were lost Public confidence was shattered

$30 Billion in stock disappeared $150 Million in Margin Calls were made I’ll explain this in a minute

1. Speculation: Buying stocks you think may rise in price then quickly selling them for profit.

Buying on Margin Investor pays fraction of price (5%) & borrows the rest from broker. The stocks are held as collateral. 2.

Calling in Margins: 3. Investors are asked to repay the loan broker gave them to buy stock

Margin calls were made when stock prices went down People didn’t have $$$ to pay for their stocks!

Brokers forced to sell (stocks had no value) FYI: Banks could invest savings $$$ in the market! Other investors panicked & sold

The crash affected people who were not even investors! But savings deposits were not insured by gov’t so they were lost as well

The Depression raged throughout the 1930s At 1st economists predicted quick recovery

Depression : Period of severely reduced economic activity characterized by rise in unemployment

1. Overproduction Industry made more goods than most consumers wanted or could afford

2. Unequal distribution of wealth: Company profits rose in 1920s but wages were NOT increased as much Lack of purchasing power

The rich got richer & the poor got poorer Most $ in hands of few who saved rather than bought

Overproduction No purchasing power +

3. Overextension of credit: Too much installment buying

4. Economic troubles abroad When people put borrowed money into market, bank funds for loans to Europe dried up

Highest tariff ever Hawley-Smoot Tariff 1930 Other countries raised tariffs as well & world trade fell over 40%

Europe buys less U.S. goods + Hawley-Smoot Tariff Less $$$ going to Europe

Tax policies of Andrew Mellon: Rich people & corporations were not paying as much income tax 5.

6. Fear: Panic swept due to market crash

7. Overspeculation: THINK You buy stocks you THINK will rise in price Based on borrowed $$$ & optimism… NOT real value

8. Government Policies There was not enough $$$ in circulation to help economy recover after the market crashed

Create a graphic organizer with 8 visuals that clearly charts AND explains the 8 causes of the Great Depression