STOCK MARKET CRASH 1920s had been a period

STOCK MARKET CRASH 1920's had been a period of good economic times Tuesday, Oct. 29 th, 1929 - NYC Stock market crashed, causing a depression that would last years

WHY DID IT CRASH? Stock Speculation Unequal Wealth Distribution Poor Government Policies Rising Unemployment Banking Failures Buying on Credit Farming Problems

#1 Stock Speculation Public invests in companies by purchasing stocks for profit Investors could borrow money to buy stock. This was known as BUYING ON MARGIN. Buying on the margin encouraged STOCK SPECULATION (Buying and selling stocks quickly to make a profit)

Stock value increased but didn’t necessarily reflect the true picture of the company (overinflated) Unscrupulous traders would buy and sell shares intentionally to inflate a given company’s stock value This gave a false sense of security/confidence in the American market

#2 Rising Unemployment Farmers were going bankrupt because of over investing Unemployment rose with little or no government assistance People were not buying goods so less was produced-so less jobs available. Electricity was used and production methods improved- less people were needed Unemployment More consumer goods were available, but there weren't necessarily more people to buy them (Overproduction)

#3 Uneven distribution of wealth 1% at top owned 25% of the wealth The middle class depended on their salaries and when productivity declined they lost their jobs Because of low savings, they had to cut back on their purchases This decline in consumption among the middle class caused major problems in the economy

#4 Poor Government Policies President Hoover didn't believe that the government should play an active role in the economy and in helping out the people He believed in “Laissez Faire” government “hands off” big business So there were little or no regulations on business and the stock market Hoover also organized some private relief agencies for the unemployed Hoover lowered the taxes of the wealthy

AMERICANS REACT TO HOOVER Hoover was increasingly unpopular, but he continued to try. He persuaded Congress to establish the RECONSTRUCTION FINANCE CORPORATION which had power to make emergency loans to banks Too little too late… Hoover wouldn't involve himself in any programs of direct governmental aid to individuals -didn't want to erode Americans sense of "RUGGED INDIVIDUALISM"

#5 Farming Problems During and after WWI the farmers had high production of food Times were good so they went in debt to expand buy land World wide Food Surplus happened as a result of Europe started to produce crops and the US had too many Food Demand dropped, farmers went bankrupt and their banks closed down.

#6 Buying on Credit Americans were buying on credit and taking out loans. Cars, stock, household appliances. Many did not have money to back up purchases.

#7 Banking Failures On October 29, 1929 investors’ confidence dropped, leading to a market collapse Investors tried to sell at once and bottom fell out of market = panic selling Lead to the failure of banks. Because of the booming 1920's economy, money was plentiful, so banks were quick to make loans to investors and to people who weren’t good risks People wanted their money-Banks didn’t have the money