Dow Jones Industrial Average

• What is the DJIA– Invented by Charles H. Dow– It is an average of stock prices of major

industries– Started with 12 stocks in 1896– Expanded to 20 stocks in 1916– Today it is the average of 30 stocks

Black Thursday

• Thursday October 24th

– Stock market loses over $3 billion in a single day

– Business and political leaders told the country not to worry because the U.S. is too strong

Black Tuesday

• Monday October 28th – Stock prices continue to fall– Nervous investors sell their stocks pushing

prices down more– Brokers called in their margin loans pushing

prices even lower

Black Tuesday

• Tuesday October 29, 1929– A record 16.4 million shares were sold

compared to 4-8 million – Worst stock market crash the U.S. had ever

seen

• November 13th – DJIA is down from 381 to 198.7– Over $30 billion was lost

The Ripple Effect of the Crash

• Banks Failed– Throughout the 20s banks loaned consumers

lots of money– After the crash consumers couldn’t pay back

their bank loans causing banks to lose money

• Bank runs– Worried that banks would run out of money

depositors rushed to take out their money– Banks couldn’t give depositors their money

back– Banks failed and depositors lost all of their

savings

The Ripple Effect of the Crash

• Production decreased– Companies had less money to produce goods– Companies had less incentive to produce goods

• Unemployment increased

• This affect is an ongoing cycle

• Factories closed

• By 1932 12 million people or about ¼ of the work force was unemployed

So What Caused the Depression?

• An Unstable Economy– Uneven distribution of wealth– Over production of goods

• Over speculation– Belief that the market would continue to rise– Buying stocks on margin

• Government policies– Lowered interest rates– Took money out of circulation