Your SlideShare is downloading. ×
0
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
1930   Stock Market Crash   Lecture 2
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

1930 Stock Market Crash Lecture 2

657

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
657
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  1. Economic Weaknesses
  2. <ul><li>Uneven Distribution of Wealth </li></ul><ul><ul><li>Few people prospered </li></ul></ul><ul><ul><li>Income of wealthiest 1% of Americans grew 60% </li></ul></ul><ul><ul><ul><li>Most workers - 8% increase </li></ul></ul></ul><ul><li>By 1929 70% of families had income below level needed for a good standard of living </li></ul>
  3. <ul><li>People stopped saving </li></ul><ul><li>Overuse of credit </li></ul><ul><li>Buying slowed </li></ul><ul><li>Warehouses filled with goods </li></ul>
  4.  
  5. <ul><li>Credit also used to buy stocks </li></ul><ul><ul><li>Risky practice, popular trend </li></ul></ul><ul><li>BUYING ON MARGIN: buying stocks with loans from stockbrokers </li></ul>Mr. B <ul><li>Mr. B buys 100 shares of stock at $10 a share </li></ul><ul><ul><li>100 X $10 = $1000 TOTAL COST </li></ul></ul><ul><li>Mr. B pays $500 and borrows other $500 from a stockbroker </li></ul><ul><ul><li>Mr. B plans to pay off the loan when he sells the stock </li></ul></ul>
  6. <ul><li>B.O.M. grew in popularity </li></ul><ul><ul><li>Brokers began requiring lower margins </li></ul></ul><ul><ul><ul><li>As little as 10% </li></ul></ul></ul><ul><ul><ul><li>Mr. Investor 10% = only $100 of $1000 investment </li></ul></ul></ul><ul><li>Seemed like an easy way to make $$$ </li></ul>
  7. <ul><li>B.O.M. = huge risk </li></ul><ul><li>If stock price rises $15/share </li></ul><ul><ul><li>Mr. Investor could sell stock for $1,500 </li></ul></ul><ul><ul><ul><li>Get back $500 </li></ul></ul></ul><ul><ul><ul><li>Pay back $500 to broker </li></ul></ul></ul><ul><ul><ul><li>$500 profit </li></ul></ul></ul><ul><li>Stock price drops to $5/share </li></ul><ul><ul><li>Mr. Investor can only sell stock for $500 </li></ul></ul><ul><ul><ul><li>$500 pays of loan </li></ul></ul></ul><ul><ul><ul><li>Loses his own $500 </li></ul></ul></ul><ul><ul><ul><li>No profit </li></ul></ul></ul>
  8. <ul><li>MARGIN CALL: Brokers force investors to repay loans if stock’s value falls below certain point </li></ul><ul><ul><li>Made sure brokers get repaid </li></ul></ul><ul><ul><li>Investors in big trouble if stock lost value quickly </li></ul></ul>
  9. <ul><li>Federal Reserve Board: works to regulate nation’s money supply to promote healthy economic activity </li></ul><ul><ul><li>Worried about B.O.M. </li></ul></ul><ul><ul><li>Made it difficult and expensive to offer margin loans </li></ul></ul><ul><ul><ul><li>Helped decrease borrowing from banks </li></ul></ul></ul><ul><ul><ul><li>But large corporations began loaning </li></ul></ul></ul>
  10. <ul><li>“ Sooner or later a crash is coming, and it may be terrific.” </li></ul><ul><ul><li>Roger Babson </li></ul></ul><ul><li>“ I see now reason for the end-of-the-year slump which some have been predicting.” </li></ul><ul><ul><li>Charles E. Mitchell </li></ul></ul>
  11. <ul><li>1928 - market value increased 50% </li></ul><ul><li>1929 – market value increased 27% </li></ul><ul><li>People in financial world saw trouble </li></ul><ul><ul><li>Sales down </li></ul></ul><ul><ul><li>Fears up </li></ul></ul>
  12. <ul><li>Thursday October 24 th 1929 </li></ul>
  13. <ul><li>Friday, October 25, 1929 </li></ul><ul><ul><li>Market returned to normal </li></ul></ul><ul><li>Monday, October 28, 1929 </li></ul><ul><ul><li>Market sank </li></ul></ul><ul><li>Tuesday, October 29, 1929 </li></ul><ul><ul><li>BLACK TUESDAY </li></ul></ul><ul><ul><li>Markets in panic </li></ul></ul><ul><ul><li>Investors tried to sell 16 million shares </li></ul></ul><ul><ul><li>Even best companies collapsed </li></ul></ul>
  14. <ul><li>October 1929 – stock market value drops by $16 billion (1/2 of its value) </li></ul>
  15. <ul><li>EFFECTS ON INDIVIDUALS </li></ul><ul><li>EFFECTS ON BANKS </li></ul><ul><li>Investors lost huge fortunes </li></ul><ul><ul><li>Especially people who bought on margin </li></ul></ul><ul><ul><li>Forced to sell shares for far less than what they had paid </li></ul></ul><ul><ul><li>People lost entire savings making up the difference </li></ul></ul><ul><li>Lost jobs </li></ul><ul><li>Pay decreased </li></ul><ul><li>Stopped buying </li></ul><ul><li>Triggered banking crisis </li></ul><ul><li>People freaked out, withdrew money and drained banks of funds </li></ul><ul><li>Lost money from own investments </li></ul><ul><li>Banks absorbed losses from stocks sold on margins </li></ul><ul><li>Drove many banks out of business </li></ul>
  16. <ul><li>EFFECTS ON BUSINESS </li></ul><ul><li>EFFECTS OVERSEAS </li></ul><ul><li>Banks and investors unable to provide industry w/ money needed to grow </li></ul><ul><li>Consumer spending down </li></ul><ul><li>Laid off employees </li></ul><ul><ul><li>People w/o jobs have even less money to spend </li></ul></ul><ul><li>Lowered wages </li></ul><ul><li>American banks called in loans from European nations/businesses </li></ul><ul><ul><li>Couldn’t pay back loans </li></ul></ul><ul><li>Foreign businesses couldn’t sell products in U.S. </li></ul><ul><ul><li>Laid off workers </li></ul></ul><ul><ul><li>Less money pumped into their economy </li></ul></ul><ul><li>Tariffs passed – made things worse </li></ul>
  17. <ul><li>Terms </li></ul>

×