1. Angela Brown Chapter 12 Section 2
The Stock Market Crash
Angela Brown
Chapter 12 Section 2

2. Stock Market
1928 Dow Jones Industrial Average - average of stock prices of major industries
March 1929 risen another 122 points
September 3 all-time high of 381

4. The Market Crashes
Prices for many stocks soared far above their real value in terms of the company’s earnings and assets.
images/adcopy/1929%20Stock%20
Crash.gif

5. Black Thursday Stocks fell slowly.
Some stockbrokers called in loans –others continued to lend
Dropped 21 points in an hour Oct. 23
Oct 24 investors began to sell – stock prices fell

6. Business, political leaders told country not to worry.
$3 billion paper loss on the stock exchange in a single day.
market_crash_1929.jpg

7. Black Tuesday
To stop panic, a group of bankers pooled money to buy stock.
Stabilized prices for a few days
Investors raced to get their money out of the stock market.
government-control-stock-market-crash-1.jpg

8. Black Tuesday, Oct. 29, 16.4 million shares were sold, compared with average 4 million to 8 million shares per day = GREAT CRASH
Continued to fall November from $30 billion total losses
Business Cycle – periods of economic growth, then contraction

9. From Riches to Ruin
Took time for people to recognize the extent of the disaster caused by the crash.
People whose entire wealth did not depend on the stock market, life went on much as before.
Brokers and banks called in loans – people did not have cash to pay them

10. The Crash Affects Millions
million of 120 million U.S. population had invested in the stock market
soon affected millions had never owned stock
Great Depression – a severe economic decline that lasted from 1929 until the U.S. entered WWII in 1941 (12 years)

11. Americans lost jobs, farms, homes
Americans lost jobs, farms, homes
Ripple effect produced world turmoil for years

12. Impact on Workers and Farmers
1931 Ford shut down Detroit automobile Factories – 75,000 out of work
European workers had government unemployment insurance
1932 ¼ labor force out of work (12 million)

13. The Gross National Product (GNP) – total value of goods and services a country produces annually ($103 billion in 1929)
1933 GNP 56 billion

14. Banks Close Banks exist on interest earned from lending out deposits.
People rushed to withdraw money.
5500 banks failed.
1933 money from 9 million savings accounts vanished.
1017&rendTypeId=4

15. Impact on the World
International banking manufacturing, trade made nations interdependent.
Global economic system crumbled.
U.S. had insisted France, Britain repay war debt.
Import taxes high = hard for European nations to sell goods in U.S.

16.
Resources/image11.gif

17. Allies relied on Germany’s reparations for payments.
Depression – investments fell off – Germany suspended reparations – Allies stopped payments
Europeans couldn’t afford to buy U.S. goods = downward cycle in global economy

18. Causes of Depression Overspeculation
Speculators bought stocks with borrowed money, pledged those stocks as collateral to buy more stocks.
Collateral is an item of value that a borrower agrees to forfeit to the lender if the borrower cannot repay a loan.
Stock market boom was based on borrowed money and optimism instead of real value.

19. Government Policies
Federal Reserve System, which regulates the amount of money in circulation, cut interest rates to spur economic growth.
1929 limited money supply to discourage lending.
Too little money in circulation to help the economy recover.

20.
An Unstable Economy
National wealth was unevenly distributed (saved or invested rather than buy goods).
Industry produced more goods than could sale.
Farmers and workers not part of boom.
Unevenness made rapid recovery impossible.