The Long Bull Market Stock Market – a system for buying and selling shares of companies. Bull Market – a period of rising stock prices. By 1929, 3-4 million Americans (almost 10% of the population) owned stocks.
Buying on margin – investors could buy stock for as little as 10% of the price and borrow the rest. Speculation – making high-risk/high reward investments. The value of all stocks went from $27 billion in 1925, to $87 billion by October 1929.
TOO MANY GOODS, TOO LITTLE DEMAND Economic danger signs
Overproduction– assembly lines turned out products faster than people could buy them. Example: when radio sales slumped, makers cut back on orders for copper wire, wood cabinets, and glass radio tubes. Montana copper miners, Minnesota lumberjacks, and Ohio glassworkers lost their jobs. Jobless workers had to cut back purchases, further reducing sales.
TROUBLE FOR FARMERS AND WORKERS Economic danger signs
Farmers: Demand and prices dropped after WWI. They couldnt pay installments on new machinery or mortgages on land. Over 6,000 rural banks went out of business. Workers: Companies grew wealthy, but laborers worked long hours for low wages. (56 hours/week at 16 cents an hour)
The Stock Market Crash Black Thursday – October 24 th, 1929 Brokers called in loans. Investors began to sell. Example: General Electric stock went from $400/share to $283 overnight.
Black Tuesday – October 29, 1929 16.4 million shares were sold compared to an average day of 4-8 million. Stocks lost $10-$15 billion in value in a single day.