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10th American History Unit IV U.S. Economic History to 1945

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Title: 10th American History Unit IV U.S. Economic History to 1945


1
10th American History Unit IV- U.S. Economic
History to 1945
  • The Stock Market Crash

2
Reading Quiz
3
The Calm Before the Storm
  • Good times for everyone?
  • 1922-1928- GNP rose by 30- this led to a feeling
    of optimism and reckless activities.
  • Automobile industry growth- 1 on 5 Americans
    owned a car in 1929 and auto related industries
    were booming.
  • Corporation profits were on the rise.
  • Unemployement was very low.
  • Union membership dropped as employers gave out
    more benefits (welfare capitalism)
  • Workers purchased new products, went to theaters,
    sporting events and other leisure activities.

4
Faith in Business and Government
  • 1920s Prosperity triumph of business
  • Republicans Harding, Coolidge and Hoover
    Pro-business policies gave business maximum
    freedom.
  • The chief business of America is business-
    Coolidge
  • Hoover was a business like leader- great for a
    prosperous nation.
  • People may have thought too highly of Hoover.
    (pedestal, superman?)

5
Stock Market Expansion
  • "When the average Joe Public starts entering the
    market en mass, then a crash is imminent....".
  • Stock Market- where stocks are bought and sold.
  • Stock- ownership in a company.
  • Successful corporation means value of stocks
    rise. (up and down)
  • False sense of security
  • Stock Market had been booming for a decade.
  • Corporate profits were soaring.
  • Unemployment was low.
  • Employee benefits and buying power was up.
  • Between 1920-1929- value of stocks quadrupled.
  • This encouraged more investors, who borrowed more
    money(on margin), which increased the number of
    shares traded and caused the price of stock to go
    up.

6
The Stock Market Crash
27 min.
7
The Beginning of the End Black Thursday, October
24, 1929.
  • Black Thursday was the first sign of the end of a
    great bull market.
  • 12.9 million shares changed hands on Black
    Thursday (a new record 4 million shares was
    considered a busy day back then).
  • Very few buyers, many accounts wiped out
  • Panic took place in the morning hours. The ticker
    tape machine fell behind by up to 4 hours leaving
    investors madly scrambling to sell their
    investments without even knowing the current
    prices.
  • By 1230 PM, the Chicago and Buffalo Exchanges
    closed down, eleven well-known speculators had
    already killed themselves.
  • Bankers came to the rescue, bought stock in U.S.
    Steel and the market recovered, for now.

8
Black Monday (October 28th, 1929)
  • No bankers came to the rescue.
  • 2nd worst day in U.S. stock market history. The
    worst day in history wouldnt come for 58 more
    years (Monday, October 19th, 1987).
  • 9.25 million shares traded and the ticker tape
    fell so far behind that the market turned people
    into fools, and people sold wildly.
  • Reality was no one could save the market at this
    point.

9
Worst Day in Stock Market History Black Tuesday -
October 29th, 1929
  • In terms of loss Black Monday was worse.
  • Collapse effected even the strongest companies.
    Stock market dropped by about 16 Billion
    Dollars.
  • A new record of 16.4 million shares were traded
    and the ticker tape fell behind by two and a half
    hours.
  • On Monday, the stock market suffered a record
    one-day loss of around 13 percent. On Black
    Tuesday, the market suffered a loss of about 12
    percent.
  • Bankers would meet but could do little.
  • By November, investors had lost 100 billion in
    assets
  • September and October, the stock market had lost
    40 percent of its value.
  • The Roaring 20s ended and the Great Depression
    started.
  • The stock market wouldnt recover for another 22
    years

10
Causes of the Stock Market Crash
  • Economic Factors
  • Poor distribution of wealth
  • Many consumers relied on Credit.
  • Credit dried up
  • Consumer spending dropped.
  • Industry struggled.
  • Financial Factors
  • Stock Market rise in the mid-1920s
  • Speculation in stock increases
  • Margin buying encouraged by the Federal Reserve
    Policies.
  • Stock prices rise to unrealistic levels.

11
What did Hoover do?
  • Traditional Approach to a depression- Cut
    Government Spending and let the Depression burn
    it self out- this will get rid of the rottenness
    in the system.
  • Hoover did not sit still
  • He called on states, cities, and all private
    charitites to feed the hungry.
  • Brought business and labor leaders together.
  • Cut his own salary by 1/5th
  • Cut taxes- did little good
  • Public works jobs.

12
Effects of the Crash
Effects
Individuals
Cause
Stock Market Crash
13
Effects of the Crash
  • Effects on Individuals
  • Investors ruined, huge fortunes disappeared
  • Margin buyers- had to pay back the margin call to
    brokers and sold for less then they paid.
    Causing loss of savings and still owed money.

14
Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
15
Effects of the Crash
  • Effects on Banks- crash triggered a bank crisis
  • Runs on the banks to get deposits out
  • Banks had made investments themselves in the
    stockmarket- these are now losses
  • Loans to stockbrokers became losses.
  • Some banks run out of business.

16
Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
Business
17
Effects of the Crash
  • Effects on Business-
  • money scarce, banks and investors unwilling or
    unable to provide the money for business to grow
    and expand.
  • Consumers cut back spending and companies began
    to lay off workers.
  • Unemployed workers make less money, less
    purchases and companies again lay off.
  • Wages dropped by over 4 Billion. Consumers
    stopped spending.

18
Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
Business
Overseas
19
Effects of the Crash
  • Effects overseas- began in U.S. but rippled over
    seas.
  • U.S. banks called in loans to foreign countries
    crippled from WWI.
  • Foreign countries exported less to U.S. due to
    low buying power there. And foreign companies
    began to lay off workers.
  • Governments around the world raised the tariffs
    on imports to protect their industries.
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