1920's had been a period of good economic times Tuesday, Oct. 29th, 1929 - NYC Stock market...
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Transcript of 1920's had been a period of good economic times Tuesday, Oct. 29th, 1929 - NYC Stock market...
1920's had been a period of good economic times
Tuesday, Oct. 29th, 1929 - NYC Stock market crashed, causing a depression that would last years
Stock Speculation Unequal Wealth Distribution Poor Government Policies Rising Unemployment Banking Failures Buying on Credit Farming Problems
#1 Stock Speculation Public invests in
companies by purchasing stocks for profit
Investors could borrow money to buy stock. This was known as BUYING ON MARGIN.
Buying on the margin encouraged STOCK SPECULATION (Buying and selling stocks quickly to make a profit)
Stock value increased but didn’t necessarily reflect the true picture of the company (overinflated)
Unscrupulous traders would buy and sell shares intentionally to inflate a given company’s stock value
This gave a false sense of security/confidence in the American market
Farmers were going bankrupt because of over investing
Unemployment rose with little or no government assistance
People were not buying goods so less was produced-so less jobs available.
Electricity was used and production methods improved- less people were needed
Unemployment
More consumer goods were available, but there weren't necessarily more people to buy them (Overproduction)
#3 Uneven distribution of wealth
1% at top owned 25% of the wealth
The middle class depended on their salaries and when productivity declined they lost their jobs
Because of low savings, they had to cut back on their purchases
This decline in consumption among the middle class caused major problems in the economy
#4 Poor Government Policies President Hoover didn't
believe that the government should play an active role in the economy and in helping out the people
He believed in “Laissez Faire” government “hands off” big business
So there were little or no regulations on business and the stock market
Hoover also organized some private relief agencies for the unemployed
Hoover lowered the taxes of the wealthy
Hoover was increasingly unpopular, but he continued to try. He persuaded Congress to establish the
RECONSTRUCTION FINANCE CORPORATION
which had power to make emergency loans to banks
Too little too late… Hoover wouldn't involve
himself in any programs of direct governmental aid to individuals -didn't want to erode Americans sense of "RUGGED INDIVIDUALISM"
During and after WWI the farmers had high production of food
Times were good so they went in debt to expand and buy land
World wide Food Surplus happened as a result of Europe started to produce crops and the US had too many
Food Demand dropped, farmers went bankrupt and their banks closed down.
Americans were buying on credit and taking out loans.
Cars, stock, household appliances. Many did not have money to back up
purchases.
#7 Banking Failures
On October 29,1929 investors’ confidence dropped, leading to a market collapse
Investors tried to sell all at once and bottom fell out of market = panic selling
Lead to the failure of banks.
Because of the booming 1920's economy, money was plentiful, so banks were quick to make loans to investors and to people who weren’t good risks
People wanted their money-Banks didn’t have the money