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

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10th American HistoryUnit IV- U.S. Economic
History to 1945

• The Stock Market Crash

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Reading Quiz
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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.

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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?)

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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.

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The Stock Market Crash
27 min.
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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.

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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.

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Worst Day in Stock Market HistoryBlack 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

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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.

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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.

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Effects of the Crash
Effects
Individuals
Cause
Stock Market Crash
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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.

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Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
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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.

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Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
Business
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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.

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Effects of the Crash
Effects
Individuals
Cause
Banks
Stock Market Crash
Business
Overseas
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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.