The stock market crash of 1929 marked the beginning of the Great Depression. Fueled by postwar economic growth and optimism, stock values increased dramatically during the 1920s as more Americans invested in the market. However, stock prices had become inflated and unsustainable. The market crashed on October 24, 1929, known as "Black Thursday", with stocks losing over 20% of their value. The full-scale panic set in on October 29th, "Black Tuesday", with over 16 million shares sold in a single day and stocks losing another 12% as the country plunged into the Great Depression. Unemployment rose sharply and economic output declined drastically over the next few years.
Overview of GLOBAL FINANCE CRISIS and impact with market. Impacts of the US Financial Crisis on Indian Economy. FINANCE CRISIS, Subprime Mortgage Crisis, US Financial Markets, US Unemployment and Stock Market Returns, Treasury Rates and Inflation,
2. Roaring 1920s (economy) Annual income increase: more than 15% (1923-1929) Real income rose: 10.5% per year from 1921 to 1923 3.4% from 1923 to 1929 1919-1929, total factor productivity increased by 5.3% 1928-1929, GNP increased about 6.6% Technological developments: radio, telephone, automobile, air-condition, refrigerator, washing machine.
3. Welcome to the Stock Market Eight straight years rise in stock values: 218.7% Mid 1920s’ real growth and prosperity Boundless hope and Optimism New American Characteristic (get rich quickly with a minimum of physical effort) Consumer Credit: $2.6billion (1920) $7.1billion (1929) Buying on Margin
4. Black Thursday(Oct 24th, 1929) Major Panic The nation’s most powerful financiers met to stop the panic Thomas Lamont: “There has been a little distress selling on the Stock Exchange due to a technical condition of the market” 12.8 million shares had been sold DJI: 21 percent decline from the high of 381.2 (Sept 3rd,1929) to 299.5. Drop of 9% from Oct 23rd President Herbert Hoover said that the economy was fine on Friday, Oct 25th
5. Black Tuesday(Oct 29th, 1929) The most notorious day in American financial history 16.4 million shares were sold Dow Jones lost another 12 percent Nearly $16 billion in market value (about $121 billion in 2007) evaporated Twenty-nine public utilities lost $5.1 billion in the month The market closed down 12.8 percent on Monday, Oct 28th
6. Allied Chemical & Dye General Electric Montgomery Ward Radio Corp. of America U.S. Steel
7. A Catalogue of NINE Causes Stock market value was too high Real downturn in business activity The subsequent raising of interest rates in London and liquidation of English investments in the United States Actions of the Federal Reserve Media and government figures Buying on margin and margin-call Excessive leverage used in utility sector Setback in the public utility market Overreaction by the market
8. Federal Reserve Actions Before the crash Raised interest rate (loan to brokers and buy on margin) During the week of the crash (final week of October) Expand credit and bolster shaky financial positions Added almost $300 million to the reserves of the banks Doubled its holdings of government securities: - adding over $150 million to reserves Discounted about $200 million more for member banks Lowered its rediscount rate from 6 to 4.5% (by mid-Nov)
13. The Great Depression Companies’ bankruptcy Stockbrokers were ruined Bank Crisis The confidence in the nation’s economy was lost. National unemployment rate – 25 percent Average weekly wage: had fallen from $25 to $17 About two out of every three children in NYC were sick Homeless and hungry Revenue Act of 1932 - increased taxes: personal income, estate, sales, postal rates - surtaxes: from 25 % to 63 % on the highest incomes
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15. From 1929 to 1932, stocks lost 73 percent of their values.
