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Stock market crash

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by Ashish Kumar on Aug 19, 2009 …

by Ashish Kumar on Aug 19, 2009

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  • 1. THE NATION’S SICK ECONOMYAgricultureRailroadsTextilesSteelMiningLumberAutomobilesHousingConsumer goodsAs the 1920s advanced, serious problemsthreatened the economy whileImportant industries struggled, including:
  • 2. FARMERS STRUGGLENo industry suffered asmuch as agricultureDuring World War IEuropean demand forAmerican crops soaredAfter the war demandplummetedFarmers increasedproduction sending pricesfurther downwardPhoto by Dorothea Lange
  • 3. CONSUMER SPENDINGDOWNBy the late 1920s,American consumerswere buying lessRising prices, stagnantwages and overbuying oncredit were to blameMost people did not havethe money to buy theflood of goods factoriesproduced
  • 4. GAP BETWEEN RICH &POORThe gap between richand poor widenedThe wealthiest 1% sawtheir income rise 75%The rest of thepopulation saw anincrease of only 9%More than 70% ofAmerican familiesearned less than $2500per yearPhoto by Dorothea Lange
  • 5. HOOVER WINS1928 ELECTIONRepublican HerbertHoover ran againstDemocrat Alfred E.Smith in the 1928electionHoover emphasizedyears of prosperityunder RepublicanadministrationsHoover won anoverwhelming victory
  • 6. THE STOCK MARKETBy 1929, many Americanswere invested in the StockMarketThe Stock Market hadbecome the most visiblesymbol of a prosperousAmerican economyThe Dow Jones IndustrialAverage was the barometerof the Stock Market’s worthThe Dow is a measurebased on the price of 30
  • 7. STOCK PRICES RISETHROUGH THE 1920sThrough most of the1920s, stock pricesrose steadilyThe Dow reached ahigh in 1929 of 381points (300 pointshigher than 1924)By 1929, 4 millionAmericans ownedstocksNew York Stock Exchange
  • 8. SEEDS OF TROUBLEBy the late 1920s,problems with theeconomy emergedSpeculation: Too manyAmericans were engagedin speculation – buyingstocks & bonds hoping fora quick profitMargin: Americans werebuying “on margin” –paying a small percentageof a stock’s price as adown payment andborrowing the restThe Stock Market’s bubble wasabout to break
  • 9. THE 1929 CRASHIn September the Stock Markethad some unusual up & downmovementsOn October 24, the market tooka plunge . . .the worst was yet tocomeOn October 29, now known asBlack Tuesday, the bottom fellout16.4 million shares were soldthat day – prices plummetedPeople who had bought onmargin (credit) were stuck withhuge debts
  • 10. By mid-November, investorshad lost about $30 billion