1929 Wall Street Crash

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Causes & Effects of Wall street crash 1929

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1929 Wall Street Crash

  1. 1. MaroofHussainSabri<br />Wall Street Crash: 1929& Great Depression<br />
  2. 2. What are Securities?<br />Securities can be either stocks or bonds which are sold and bought on the stock market.<br />Maroof Hussain Sabri<br />2<br />
  3. 3. What is the New York Stock Exchange?<br />World’s largest market place for securities<br />Currently membership limited to 1,366 members. <br />Seat obtained by purchasing from existing member<br />Maroof Hussain Sabri<br />3<br />
  4. 4. Interesting Fact: How did Stock Exchange begin?<br />The Exchange evolved from a group of men who used to meet under a buttonwood tree on what is now Wall Street in 1792 to discuss securities<br />Maroof Hussain Sabri<br />4<br />
  5. 5. Before The Crash<br />
  6. 6. The Great Bull Market<br />Great American stock exchange boom of 1928-1929<br />Huge bubble where there were high speculations<br />People made many investments to make big money<br />Maroof Hussain Sabri<br />6<br />
  7. 7. Bull Market sparked by?<br />Growth in American industries<br />Technological progress<br />Increase in productivity <br />Rise in national income from 33,200 million to 79,200 million from 1914 to 1925<br />Expectation for great future and un-boundless optimism for the market<br />Maroof Hussain Sabri<br />7<br />
  8. 8. What Sparked This Growth in Industry?<br />The Electrification of the production process<br />This expanded the ability to transform raw materials into finished products<br />Ex. Ford Motors<br />Maroof Hussain Sabri<br />8<br />
  9. 9. HOWEVER??????<br />Wages did not raise even though the production did and prices of products failed to decrease.<br />There was not an excess demand for labor<br />Leaving unemployment rate steady<br />Maroof Hussain Sabri<br />9<br />
  10. 10. Stock Exchange Average Rise in Share Prices 1924-1928<br />Maroof Hussain Sabri<br />10<br />
  11. 11. Political Promises Spark Market Speculation<br />Herbert Hoover was the most promising candidate for president because of his ideas which promised increased economic growth in America.<br />Maroof Hussain Sabri<br />11<br />
  12. 12. Hoover’s Plan<br />Proposed a Tariff bill which Senator Smoot presented called the Smoot-Hawley Tariff<br />Promised increased tariffs on imports<br />Planned to allow more productivity for US manufacturers<br />Help ease unemployment<br />Maroof Hussain Sabri<br />12<br />
  13. 13. Investors marvel at This Proposal<br />Investors believed profits from stocks would increase if the tariff bill was passed<br />Sparked intense speculation<br />Dow Jones Industrial Average increased by almost 35% because expected election of Hoover and his bill<br />Maroof Hussain Sabri<br />13<br />
  14. 14. This Bubble was bound to Burst!<br />
  15. 15. The Crash of 1929<br />“American economic disaster that precipitated the Great Depression which was approximately a 10 year economic slump affecting all the western industrialized countries.” –Encyclopedia Britannica<br />Maroof Hussain Sabri<br />15<br />
  16. 16. General Causes of the Crash<br />Rampant over speculation in market<br />People holding companies and investment trusts (which by nature creates debt)<br />Bursting of Bull Market economic bubble in August 1929<br />Large bank loans could not be liquidated<br />Maroof Hussain Sabri<br />16<br />
  17. 17. Direct Cause of Crash of Stock Market<br />After Hoovers election certain people began to doubt if the tariff bill would help the US Economy<br />Farmers, America’s trading partners, Democrats, and some Republican’s opposed the passage of new tariffs.<br />On October 21, 1929 Senate announces plans to limit tariff revisions<br />October 22, 1929 more limits set on tariff bill<br />Maroof Hussain Sabri<br />17<br />
  18. 18. Investors Realize Tariff Bill is DOOMED!!!!!!!!!!!!! <br /> PANIC! PANIC! PANIC!<br />Maroof Hussain Sabri<br />18<br />
  19. 19. Black Thursday<br />On October 18, 1929 prices began to fall<br />Panic stuck out on October 24 “BLACK THURSDAY” after the announcements from the Senate<br />Record of 12,894,650 shares were traded<br />Maroof Hussain Sabri<br />19<br />
  20. 20. Black Thursday (Continued)<br />Major banks and investment companies bought up great blocks of stocks to stop the panic but….<br /> THERE ATTEMPTS FAILED!!!!!!!!!<br />Maroof Hussain Sabri<br />20<br />
  21. 21. Black Monday and Tuesday<br />The Panic continued and 16,000,000 shares were traded<br />Prices on the stock market collapsed completely!!!!<br />Maroof Hussain Sabri<br />21<br />
  22. 22. Hoover’s Plan to combat Crash<br />Extracted promises from manufacturers to maintain production.<br />Signed legislation providing generous additional funds to pubic works<br />Smoot-Hawley Tariff 1930 (finally passed): to raise duties 50%<br />Maroof Hussain Sabri<br />22<br />
  23. 23. ALL THESE FAILED TO EASE CRISIS AND DEPRESSION FOLLOWED!!!!<br />Maroof Hussain Sabri<br />23<br />
  24. 24. Causes of Great Depression<br />Agriculture had crashed in 1919 and was a continuing source of weakness.<br />Banks over-extended<br />Wages had not kept up with profits<br />In 1920’s consumers were reaching limits of ability to borrow and spend <br />Maroof Hussain Sabri<br />24<br />
  25. 25. Cause’s of Depression (continued)<br />Production was declining and unemployment increasing EVEN before the crash!<br />Destroyed confidence in the economy<br />Down sizing of industry causing unemployment<br />Maroof Hussain Sabri<br />25<br />
  26. 26. The Great Depression<br />The stock prices in the next three years continued to fall<br />By 1932 prices had dropped to only about 20% of there original value<br />Maroof Hussain Sabri<br />26<br />
  27. 27. Effects of Depression on Individual<br />Thousands of individual investors ruined<br />Loss of savings<br />Poverty and panic<br />Less spending and demand<br />Unemployment<br />Wages decrease<br />Maroof Hussain Sabri<br />27<br />
  28. 28. Decline in Production<br />DOWNWARD SPIRAL<br /><ul><li>little out put means less jobs
  29. 29. Manufacturing output fallen to 54% of its 1929 output
  30. 30. 25-30% of work force unemployed
  31. 31. 12 -15 Million jobless</li></ul>MaroofHussainSabri<br />28<br />
  32. 32. Effects of Depression on Economy<br />Stock prices drop<br />Industry declines<br />Value of assets decline<br />11,000 of 25,000 banks fail<br />Because of tariffs international trade market decreases<br />Causes a world wide depression<br />Maroof Hussain Sabri<br />29<br />
  33. 33. World Wide Depression<br />America’s intimate relationship with Europe causes serious economic troubles overseas and contributes to a world wide depression<br />Maroof Hussain Sabri<br />30<br />
  34. 34. Reasons America’s Depression Effects World<br />World War I left Europe with large war debts<br />America was a major financer and creditor of post war Europe. Once US slumped American investments to Europe dried up<br />Germany hurt because of large war reparations<br />Maroof Hussain Sabri<br />31<br />
  35. 35. Reasons (continued)<br />Nations attempt to protect domestic production with tariffs and having quotas on imports<br />This only reduced international trade and damaged market even more<br />Maroof Hussain Sabri<br />32<br />
  36. 36. Hope Shattered<br />In 1930 there is a slight rise in production and it seems depression might ease however: Spring 1931 the weakening of western European economy causes the major bank in Vienna to crash and Germany defaults on its war reparation payments<br />Maroof Hussain Sabri<br />33<br />
  37. 37. Hoover’s last Attempts<br />Hoover proposes one year moratorium on war debt payments<br />Too little too late<br />Financial panic: European Government goes off their gold standard and devalues currencies, destroying exchange system (hurts trade)<br />Europe withdraws gold from US banks<br />Maroof Hussain Sabri<br />34<br />
  38. 38. Gold Crisis<br />With draw of European gold from US banks causes<br />Banks to call their loans on US businesses<br />Bankruptcies<br />Bank customers go into ruin<br />Eventually banks in ruin<br />Maroof Hussain Sabri<br />35<br />
  39. 39. Hoover’s last Attempts (continued)<br />Reconstruction Finance Corp- to lend funds to banks, railroads, etc<br />Glass-Steagall Act- Gold to meet w/ foreign withdraws<br />THESE AND OTHER ACTS FAILED TO PROMOTE RECOVERY!!!!<br /> The American People lose fail in Hoover.<br />Maroof Hussain Sabri<br />36<br />
  40. 40. Franklin D. Roosevelt Wins Presidency<br />Political and revolutionary thinker<br />Elected 1932<br />Introduced major changes in structure of economy<br />New Deal<br />Maroof Hussain Sabri<br />37<br />
  41. 41. FDR’s New Deal<br />Opposite of Laissez-Faire<br />Increased government regulation<br />Massive public works projects for relief of poverty<br />Aid for the unemployed and unfortunate<br />Maroof Hussain Sabri<br />38<br />
  42. 42. Some of FDR’s Programs<br />Civilian Conservation Corp<br />National Recovery Administration<br />Federal Deposit Insurance Corporation<br />Securities and Exchange Commission<br />Maroof Hussain Sabri<br />39<br />
  43. 43. More Programs<br />1935 Wagner Act (authority of Federal government in industrial relations)<br />National Labor Relations Board<br />Social Security, unemployment compensation, disability insurance<br />Maroof Hussain Sabri<br />40<br />
  44. 44. End to Depression<br />Outbreak of World War II causes<br />US factories flooded with orders form armaments and munitions<br />Unemployment decreases and production increase<br />Depression ends completely by the time the US enters the war in 1941<br />Maroof Hussain Sabri<br />41<br />
  45. 45. What did we learn from the 1929 Crash?<br />Market can be very unpredictable<br />Investors must not get caught up in market bubble illusions<br />Market forces alone may be unable to achieve recovery from economic slump<br />Changes were needed in US economic structure<br />Maroof Hussain Sabri<br />42<br />
  46. 46. US Govt Actions to Ensure Economic Stability<br />Taxation<br />Industrial regulation<br />Social programs (social security, pensions, welfare, others)<br />Public programs<br />Deficit spending<br />Maroof Hussain Sabri<br />43<br />
  47. 47. Food for Thought<br />Currently our economy is prosperous because of new technology and advancements (especially in computers)<br />Its Important not to over speculate or jump the gun when it comes to investments<br />Important to know stock market crashes are still possible (Crash of 1987 and 1997)<br />Maroof Hussain Sabri<br />44<br />
  48. 48. Thank You for Your Attention<br />Maroof Hussain Sabri<br />45<br />

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