The Stock Market Crash

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The Stock Market Crash
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Dow Jones Industrial Average

• What is the DJIA
• Invented by Charles H. Dow
• It is an average of stock prices of major
  industries
• Started with 12 stocks in 1896
• Expanded to 20 stocks in 1916
• Today it is the average of 30 stocks

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Black Thursday

• Thursday October 24th
• Stock market loses over 3 billion in a single
  day
• Business and political leaders told the country
  not to worry because the U.S. is too strong

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Black Tuesday

• Monday October 28th
• Stock prices continue to fall
• Nervous investors sell their stocks pushing
  prices down more
• Brokers called in their margin loans pushing
  prices even lower

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Black Tuesday

• Tuesday October 29, 1929
• A record 16.4 million shares were sold compared
  to 4-8 million
• Worst stock market crash the U.S. had ever seen
• November 13th
• DJIA is down from 381 to 198.7
• Over 30 billion was lost

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The Ripple Effect of the Crash

• Banks Failed
• Throughout the 20s banks loaned consumers lots of
  money
• After the crash consumers couldnt pay back their
  bank loans causing banks to lose money
• Bank runs
• Worried that banks would run out of money
  depositors rushed to take out their money
• Banks couldnt give depositors their money back
• Banks failed and depositors lost all of their
  savings

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The Ripple Effect of the Crash

• Production decreased
• Companies had less money to produce goods
• Companies had less incentive to produce goods
• Unemployment increased
• This affect is an ongoing cycle
• Factories closed
• By 1932 12 million people or about ¼ of the work
  force was unemployed

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So What Caused the Depression?

• An Unstable Economy
• Uneven distribution of wealth
• Over production of goods
• Over speculation
• Belief that the market would continue to rise
• Buying stocks on margin
• Government policies
• Lowered interest rates
• Took money out of circulation

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