Stock Market Crash and the beginning of the Great Depression
Stock Market Crash and the beginning of the Great Depression HIST 2112
Popular in American History Since 1865
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This 3 page Class Notes was uploaded by Carina Sauter on Sunday February 28, 2016. The Class Notes belongs to HIST 2112 at University of Georgia taught by Dr. Rohrer in Spring 2016. Since its upload, it has received 18 views. For similar materials see American History Since 1865 in History at University of Georgia.
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Date Created: 02/28/16
Leaning to the Left: Stock Market Crash and the Beginning of the Great Depression I. Stock Market Crash – October 1929 • Previously the richest nation in the world o Growing economy at 7% per year § Now growing at 2% o Invest a great amount in stock market o Price market prices rise in 1925 o Post WWI mini recession, but by mid 1920’s we were reviving o 1926-1927: Bull Market § when prices are rising quickly in market and investors are being optimistic § helped out by healthy manufacturing sector and consumerism § large participation rate; in 1920’s, even everyday Americans invested in the stock market § buying stocks on margin (speculative investing); often times investor would only pay 10-12% of stock and borrow rest § enticing many to invest more than elite § investing life savings § very optimistic § stock market had become a place where everyday people believed they could become rich • most did not have the ready cash • Major Cause of Stock Market Crash o Buying stocks on margin § When someone did not have the cash, they would buy it on margin – put down some money and borrow the rest from a broker • Only needed 10-20% to put down § Risky behavior § “margin call” – stock buyer needed cash to pay back load immediately § more money in stock market than in hard cash • Stock Market Crash o drop in steel production, automobile and home consumption o Thursday, October 24 , 1929: Black Thursday § Prices of stocth dropped 12% o Friday, October 25 , 1929 § 12% more o In first three trading days after Oct 24, the NY Stock Exchange erased over 5 billion dollars’ worth of share values (equal to 69 trillion today) o Margin calls being sent out § Many could not pay for stocks, less than they paid for them o Mass suicides § Losing entire life savings § Companies go out of business § Runs on the bank – run to bank and take out hard cash to keep at home § Crash was only the spark of the depression § Many longer standing problems § CAUSES AND EFFECTS OF GREAT DEPRESSION – ESSAY QUESTION • Problems with economy o Laissez-faire, unregulated economy § Harding, Coolidge, Hoover democratic presidents • Little oversight over stock market § Federal reserve • Regulate money supply, starts in 19-teens § Potential for growth but greater likelihood for downfall o Unhealthy Agricultural Sector § Overproduction § Environmental problems o Worldwide economic woes § Global § Economy’s around the world are suffering § Worldwide phenomenon § Germany, Brazil, etc. were depressed by 1925-1929 • Poland, Argentina, Canada and US were pulled in II. Great Depression • Deepest and longest-lasting economic downturn in the history of Western Industrialized World • Lasts from 1929-1940 • Consumer spending decreases • Industrial output decreases • Unemployment increases • Banking panics o Anxious people withdraw cash o Liquidate o Puts banks out of business • 1930’s o some 15 million unemployed o ½ country banks failed o industrial production decreases 40% o gross domestic product decreases 30% o unemployment at about 25% o Bread lines for food o Children for sale o Hooverville: “towns” of homeless people, making homes out of cardboard boxes § Hundreds § All over the country o Farmers leave crops in the field because they can’t afford to harvest them, yet thousands are going hungry • Federal Governments response o With depression comes different rolls for government o 180 degree turn o 1932 Franklin Delanor Rooselvelt elected § decrease in liberal democrats § re-elected in 1946, 1940, 1944 § move the farthest to the left we ever had in 240 years §