The Wall Street Crash 29th October 1929 The Roaring 20s: The Good 1. Government policy of laissez faire. 2. US industry had been boosted by WWI. 3. Mass.

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Presentation transcript:

The Wall Street Crash 29th October 1929

The Roaring 20s: The Good 1. Government policy of laissez faire. 2. US industry had been boosted by WWI. 3. Mass production: cars, radios, refrigerators. 4. Credit Buying - people could buy now, pay later (usually on an instalment plan with interest charges). There is massive consumer spending. Confidence!!

The Roaring 20s: The Bad and the Ugly Farmers DID NOT prosper new machines produced more which lowered prices. The black population DID NOT prosper laid off by farmers; given low paying jobs and lived in sub- standard housing. Recent immigrants DID NOT prosper given low paying jobs and lived in sub-standard housing. Prohibition caused extremely high crime: bootleggers & gangsters.

Background Many people bought stocks on margin - Many people bought stocks on margin - purchasing stocks by paying only a small percentage of the price and borrowing the rest. President Hoover’s aim: “a chicken in every pot and two cars in every garage”. A Good idea, BUT... 50% of American families earned less than $2000 a year American Industry was producing too many goods – people didn’t earn enough to buy

Shares & the Stock Market: How it Works Companies borrow money (capital) from investors Investors (shareholders) get a share of the profit the company makes ‘Shareholders’ can sell their shares on the stock market (Wall Street, NYC). Prices can change every day according to how well the company is doing. Becoming involved in risky stock market transactions to make a quick profit - Speculation

Speculation American industry booms, price of shares move up Investors sell their shares at higher prices and make huge profits Get Rich, Quick!! People see others making money; more people invest, pushing prices higher People buy “on the margin” Let’s get RICH!!!!

Speculation 20 million shareholders by summer 1929 Prices reach an all time high Experts start to worry Profits Fall Car and Steel Production falls Sell People start to Sell

Crash! 19th October million shares sold. Prices begin to fall Margin buyers told to find more cash President Hoover states: states: “The fundamental business of the country, is on a sound and secure basis.”

The Final Crash! Black Tuesday – October 29, million shares sold No buyers found Ticker tape machines break due to pressure, many are ruined before they can act

Re-Cap Overproduction Stocks of unsold goods Demand falls Profits Fall People start to sell shares Panic. CRASH!!

Consequences Fred Bell was a wealthy businessman before the Wall Street Crash. He became one of the many unemployed men who tried to make a living by selling apples in the street

CONSEQUENCES

CONSEQUENCES Thousands of small businesses failed. Banks closed. People bought less : more of the above. Suicides Hawley-Smoot Tariff –1930; highest protective tariff ever. Caused even more problems; angered foreign nations; reduced world trade drastically Ultimately, the Great Depression was the result Great DepressionGreat Depression The United States remained economically depressed until the start of WWII (1941), which boosted manufacturing and buying and gave jobs to millions of men and women through the armed services.