1. The Stock Market Crash
15.1

2. Background
1920s appeared to be a decade of prosperity = “The Roaring 20s”
Some believed economic problems existed below the surface
Most ignored these warnings

3. Credit
Confidence in nation’s prosperity led many to purchase goods on credit
1929: Credit purchases =$7 billion
Government encouraged credit spending by keeping interest rates low

4. Problems With Easy Credit
Easy access to credit enabled people to buy things they couldn’t afford
Economic experts worried about debt
High consumer debt could cripple people in an economic downturn

5. Bull Market A market with an upward trend in prices
Seemed no end to 1920s Bull Market
Bear Market
A market with a downward trend in prices

6. Stock Speculation
= Playing the market by buying and selling stocks to make a quick profit – becomes popular
This stimulated economic growth
Rapid buying and selling inflated stock prices
Could be a problem if demand decreased.

7. Margin Buying = The practice of purchasing stocks with borrowed money
Speculators often buying stock with 10% down – borrowing 90%
Margin buying was great with a bull market But….
Bear market would be investors deep in debt.

8. The Crash October 24, 1929: Black Thursday
The beginning of the crash
Rising interest rates made large numbers of investors nervous
They began selling large # of shares
Leads confidence to drop and prices pushed lower and lower

10. Black Tuesday Stock prices sank to shocking lows
October 29, 1929
Stock prices sank to shocking lows
16 million shares of stock were sold in one day
huge amount of debt

12. Stock Brokers & Debt
Brokers began to contact investors who had purchased theirs on margin(by borrowing)
They demanded cash to cover their loans
Investors were unable to pay
had to sell stocks at huge losses
By mid- Nov – leading stocks values were cut in half!!