Stock market crash


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by Ashish Kumar on Aug 19, 2009

Published in: Business, Economy & Finance
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Stock market crash

  1. 1. THE NATION’S SICK ECONOMYAgricultureRailroadsTextilesSteelMiningLumberAutomobilesHousingConsumer goodsAs the 1920s advanced, serious problemsthreatened the economy whileImportant industries struggled, including:
  2. 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. 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. 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. 5. HOOVER WINS1928 ELECTIONRepublican HerbertHoover ran againstDemocrat Alfred E.Smith in the 1928electionHoover emphasizedyears of prosperityunder RepublicanadministrationsHoover won anoverwhelming victory
  6. 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. 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. 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. 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. 10. By mid-November, investorshad lost about $30 billion