Causes and Consequences of the Wall Street Crash 1929 - PowerPoint PPT Presentation

About This Presentation
Title:

Causes and Consequences of the Wall Street Crash 1929

Description:

Causes and Consequences of the Wall Street Crash 1929 Overview Unequal distribution of wealth Poor overseas markets Too many goods and not enough demand Heavy ... – PowerPoint PPT presentation

Number of Views:269
Avg rating:3.0/5.0
Slides: 14
Provided by: TheM60
Category:

less

Transcript and Presenter's Notes

Title: Causes and Consequences of the Wall Street Crash 1929


1
Causes and Consequences of theWall Street
Crash1929
  • Overview

2
Unequal distribution of wealth
Poor overseas markets
Too many goods and not enough demand
The share bubble of speculation
Heavy borrowing
Wall Street Crash
Buying on the margin
The Florida Land Boom 19241926
The Wall Street share boom
How long could the share boom last?
Did people see the crash coming??
The Florida Land Boom ends
3
Unequal distribution of wealth
  • Many Americans could not afford to be part of the
    consumer society
  • The American boom had been built on mass
    production producing mass profits
  • However, the market for mass produced goods was
    limited.

4
Poor overseas markets
  • The American Government wished to protect home
    markets from foreign competition
  • Therefore it imposed high import duties
  • Foreign countries responded by imposing high
    import duties on American goods
  • This meant that American companies had to rely on
    the home market

5
Too many goods, not enough demand
  • Home demand was not great enough to absorb all
    the good available
  • To maintain profits, employers started to cut
    back on labour costs
  • By 1928 2 million Americans were out of work

6
The Wall Street Share Boom
  • In the early days of the impact of mass
    production company profits increased
  • Many ordinary people saw investing in companies,
    by buying stocks and shares, as a way of making
    easy money.
  • In the early days many people made a great deal
    of money

7
Heavy borrowing
  • Americans were confident that the value of stock
    and shares would continue to rise.
  • Therefore they borrowed from banks and other
    financial institutions to buy shares
  • The banks and other financial institutions shared
    their confidence and so would allow bigger loans
    than normal.
  • Millions of Americans were in debt

8
Buying on the margin
  • Stockbrokers also allowed the buying of shares on
    credit.
  • The purchaser bought the shares for a 10 deposit
    (the margin) against the hope that they could
    sell the shares quickly for a higher price.
  • Their profit would cover the balance of the
    original cost and make a profit for the purchaser

9
How long could the boom last?
  • The peak of the boom was 1927 1929
  • When share prices fell, buyers would snap up
    these shares, the price would rise again, and
    they would sell at a profit
  • As a result the boom kept going

10
The Bubble of Speculation
Everyone was buying and selling shares!
11
The Florida Land Boom1924 1925
  • Credit also allowed people to buy land which they
    hoped would rise in price
  • Plots of land were bought for 10 deposits
    (called binders) and sold off quickly to cover
    debts and make a profit.
  • Poor land in Florida was sold off under this get
    rich quick approach

12
The Florida Land Boom collapses
  • Buyers started to realise that the land they were
    buying at inflated prices was worthless
  • People began to sell in a hurry which made the
    prices collapse and accelerated the collapse of
    the Boom
  • Many individuals and banks were ruined because of
    this.

13
Could people see the Crash coming?
  • The Florida Boom collapse started people thinking
    that the good times were in danger of ending.
  • Banks realised that they were over-extended and
    started to raise interest rates to decrease the
    money available for buying on the margin
  • However too many people were already in too deep
    to pull out.
Write a Comment
User Comments (0)
About PowerShow.com