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Causes of the Stock Market Crash of 1929

Causes of the Stock Market Crash of 1929. The stock market experienced unprecedented growth in the 1920s, but serious flaws in the economy and the market itself led to economic collapse. Causes Business was booming, but investments were made through buying stocks on credit. ( overspeculation )

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Causes of the Stock Market Crash of 1929

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  1. Causes of the Stock Market Crash of 1929

  2. The stock market experienced unprecedented growth in the 1920s, but serious flaws in the economy and the market itself led to economic collapse. • Causes • Business was booming, but investments were made through buying stocks on credit. (overspeculation) • Overproduction of farm products causes the top- soil in the Midwest to dry up. • There was excessive expansion of credit, and people were using instalment plans in order to make their wages stretch. The problem is that people are borrowing more money than they could pay back. • Bank deposits were invested in the market. Therefore a large number of small investors begin buying stocks on margin. Margin means people would just a pay a little and the bank would loan them the rest of the money to buy the stock. • Business failures led to bankruptcies. • Panic selling of stocks led to the collapse of the stock market.

  3. When the market collapsed, everyone made bank runs, meaning clients panicked and attempted to withdraw their money from the banks only to discover that the banks ran out of money, and funds were lost • Black Thursday • Black Tuesday

  4. People lost investments, which led to financial ruin, and many committed suicide. • There were no new investments. • Speculation- taking a big risk and expecting a big return as well. • The crash signaled the beginning of the Great Depression although serious flaws in the economy had existed for years. • Because most of the investors were banks and corporations that were now bankrupt we are going to see many people lose their jobs. Consequences of the stock market crash of 1929

  5. President Hoover thought the economy would on its own and was only a short term problem. • He only responded by encouraging Americans not to give up. • The homeless built shanty-towns. • Hawley-Smoot Tariff (1930): highest tariff in the U.S. history. • Declared an end to the war debts owned by Europe to slow the collapse of the world banking system. • Created jobs by using public funds for public works. • RFC: Reconstruction Finance Corporation • The veterans in Washington Hooverville on the Mall in Washington and refused to leave until they received their Bonus Bill. Herbert Hoovers Response

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