Transcript Stock Market Crash - Fern Creek US History

Stock Market Crash
Boom and Bust
Key Terms
• Federal Reserve System
• Stock Exchange
• Corporation
• Stock
• Dividend
• Buying on the Margin (Margin Call)
what is the stock market?
False Prosperity
• Since World War I the economy had
boomed
• Value of total stocks grew from 27 to
87billion
• The idea that everyone could/should be rich
was very common
New Products and Ads of the 20s
Missed Signs
1.
2.
3.
4.
Uneven Prosperity
Buying on Credit
Stock Market Speculation
Too much supply Too little demand
Uneven Prosperity
• Most of population was struggling most
American families had no savings
• All members of the family had to work to
get buy, children included
• The actual “rich” made up less than 1%
Buying on Credit
• People were tempted to live well beyond
their means and did just that
Stock Market Speculation
• People bought a lot of stock on the hope it
would climb in value
• Buying on the margin- buying stock on
credit with high interest that can be paid if
you sell for profit
• Worked for a while, couldn’t last, no real
value
Too much supply
Too little demand
• Producers made so much stuff that it was
stored in warehouses
• Many could not afford to buy these new
inventions, at least not in the quantity they
hoped
Missed Signs
• These things should have been warning
signs
• We are now much more attentive to these
problems (oh really????????)
A Bad Decision
• In an effort to stop over speculation the
Federal reserve limited the money supply
by raising interest rates this would leave
very little in circulation to help stimulate the
Economy when things went bad
Black Thursday
• Many worried investors begin to sell stocks
at a big loss
• GE bought for $400 a share sold for $238
• $3 billion lost that day
• The government said don’t worry
• Many investors pool money and that helps
for a few days
Black Tuesday
• Investors still worried rush to pull money
out of the stock market.
• Prices fall, businesses and investors lose
billions
• Brokers and Bankers call in their loans but
no one had the cash to pay them
• We are in a Crash
From Crash to Depression
• This crash effected many in business and
stocks immediately over the next few
months it began to be felt by almost all
Americans
• GNP $103 billion in 1929
• GNP $56 billion in 1933
• The Crash was a signal for bad times NOT
THE CAUSE
Effects of the Depression
Businesses Had No Money
Businesses could not hire workers or keep old
ones
• 1in 4 Americans out of work (25%)
• Crop Prices fell- farmers lost land
• Banks tried to get back investments but
couldn’t over 5,000 banks close
• 9 million savings accounts vanish
World Wide Impact
• Many Europeans were depending on
Germany’s World War I reparation
payments
• To pay those payments Germans counted on
American investment
• Americans were out of money to invest,
Germany cannot pay.
• Europe is now drawn into depression
Social Impact of the Depression
Poverty is Rampant
• The people who were already poor were
hit the hardest
• Homelessness numbers shot way up
• Hoovervilles- named after the president,
were shanty towns were homeless
congregated. Houses were made from
cardboard and scrap material
Farm Problems
• Farmers can’t pay mortgages so banks
take property
• Dust Bowl- a region of the Great Plains
that experienced drought for much of the
1930s
• Dust Bowl forces about 100,000 migrants
from the Great Plains to California
Strains on Society
1. Impact on Health
2. Impact on the Family
3. Racial/Ethnic Discrimination
Impact on Health
• Many American are starving
• Especially dangerous to children’s health
• Some got a little relief from government
organizations
Impact on the Family
• Many men begin to see themselves as
failures, can’t support the family
• Women are often fired if they are
married so not to take a job from a man
• Women have little opportunity outside of
cleaning or typing etc.
Racial/Ethnic Discrimination
• Hard times increase hostilities toward
immigrants
• Many white southerners openly declared that
no African American should hold a job if
whites were out of work.
• African Americans were denied civil rights
(voting, education, healthcare) and increased
lynching
• Relief agencies also discriminated so black
churches set up their own organizations
Racial/Ethnic Discrimination
• Hispanics and Asian Americans were
deported
• Many of the deported were actually born
in America
People Turn to Symbols
• To deal with the problems of the day
many turn to humor. Newspapers,
cartoons, radio & movies. People laugh
to escape
• The Empire State building gave people
pride as well as a technical marvel
• 21st Amendment- marked a symbolic end
to organized crime and corruption
Government Action or Lack Of
• Hoover thought that voluntary action by
business was the only way.
• Hoover believed that direct federal help
would destroy people’s self respect and
create a large bureaucracy
• Government began to spend money on
large construction projects, i.e. Boulder
(Hoover) Dam
Hawley-Smoot Tariff
• Highest import tax on foreign goods
ever
• Europe response with huge taxes on
American goods
• All international trade grinds to a halt
• The world is much worse off than it
was before Hawley-Smoot
Hoover is in trouble
• Many blamed Hoover for their problems
• Hoover allows the Army to use violence
to end the “Bonus Army” protest
• Obvious to most he will lose re-election
FDR
• Franklin Delano Roosevelt elected in 1932
• Announces he has a “New Deal” for Americans
during his nomination speech at the party’s
convention
• Ready to Experiment with new gov. controls
• Open to the ideas of John Maynard Keynes
• Keynesianism- when times are bad the
government must get involved (usually spending)
to make it better
• Deficit Spending-spending more than you make
Today
http://finance.yahoo.com/echarts?s=%5EDJI
Today
• Unemployment high (but not nearly as high
as the depression) about 8%-10%
• Business, financial, personal finance news CNNMoney.com