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The Stock Market Crash

The Stock Market Crash. Angela Brown Chapter 22 Section 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.

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The Stock Market Crash

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  1. The Stock Market Crash Angela Brown Chapter 22 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 http://www.dowjonesstockmarket.info/dow_jones_stock_market_results.jpg

  3. http://leduc998.files.wordpress.com/2008/05/graph1920-1929.gifhttp://leduc998.files.wordpress.com/2008/05/graph1920-1929.gif

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

  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 http://blacktuesday.info/images/Black%20Tuesday/Black_Tuesday_2.jpg

  6. Business, political leaders told country not to worry. • $3 billion paper loss on the stock exchange in a single day. http://lphs.k12.ca.us/rm1/online/hotpotatoestav/TAV10-1/_Stock_ 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. http://static.howstuffworks.com/gif/ 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 13 198.7 from 381 - $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 www.britannica.com

  10. The Crash Affects Millions • 1929 4 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. http://www.internationalist.org/wallstreet1929.jpg • Americans lost jobs, farms, homes • Ripple effect produced world turmoil for years http://www.picturehistory.com/images/products/1/6/1/prod_16139.jpg

  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 http://www.downtownexpress.com/de_76/wall.gif

  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. http://cache.eb.com/eb/image?id= 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. http://www.j-bradford-delong.net/Graphics/gif_files/PageMill_http://www.j-bradford-delong.net/Graphics/gif_files/PageMill_ 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. http://www.black-thursday.net/img/cover0.png 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.

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