STOCK MARKET CRASH

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STOCK MARKET CRASH

• 1929

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The Crash BEGINS

• Oct. 21, 1929- Stock market plunged, brokers made
  margin calls, customers put stocks up for sale

• Oct. 24 (Black Thursday)- Market plummeted
  further
• Oct. 29 (Black Tuesday)- Stock market took a
  deeper dive (10-15 bil. drop in value)

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Stock Market Crash (the cycle)

1. Stock values collapsed
2. Banks lost money on their investments
3. Speculators defaulted on their loans
4. Banks cut back on loans they made
5. Less credit available (money to borrow)
6. Banks didnt insure bank deposits
7. Customers lost their savings banks collapsed
8. Economy went into a recession (economic slowdown)

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Quote on the Depression

• The Great Depression began in 1929 when the
  entire world suffered an enormous drop in output
  and an unprecedented rise in unemployment. World
  economic output continued to decline until 1932
  when it clinked bottom at 50 of its 1929 level.
  Unemployment soared, in the United States it
  peaked at 24.9 in 1933. It remained above 20
  for two more years, reluctantly declining to
  14.3 by 1937. It then leapt back to 19 before
  its long-term decline. Since most households had
  only one income earner the equivalent modern
  unemployment rates would likely be much higher.
  Real economic output (real GDP) fell by 29 from
  1929 to 1933 and the US stock market lost 89.5
  of its value.

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Choices the banks had made

• Banks had lent money to stock speculators

• Many banks had invested depositors money in the
  stock market, hoping for higher returns

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Disparity of income

• 2/3 of families earned less than 2,500 a year

• Top 5 of Americans earned 30 of the nations
  income

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Wrong Decisions and Resulting Problems

1. Installment plan- customers make small down
   payment the rest in monthly installments
2. Buyers paying off their debts forced them to
   reduce other purchases
3. Low consumption led manufacturers to cut
   production lay off employees

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Wrong Foreign Policy Decision

• Hawley-Smoot Tariff- raised import taxes hoped
  to help American farmers.
• In response, foreign nations stopped purchasing
  American goods

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Farming Economy Collapses

• Farmers mortgaged their land to pay for seed,
  feed, equipment

• After WWI, prices sank so low, farmers couldnt
  even earn back their costs or make a profit

• Between 1930-1934, creditors foreclosed on nearly
  1 million farms

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Farming Economy Collapses

• Crop Prices

• Farmers destroyed their crops to raise crop
  prices by reducing the supply

Farmers dump milk

• Dairy farmers poured milk out onto the roads to
  reduce the supply and raise prices