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Objective: To examine the causes of the Great Depression
Do Now: How did an increase in wages help cause an economic boom?
Some Basic Background on the Stocks and the Economic Market
What are Securities?
• Securities can be either stocks or bonds which are sold and bought on the stock market.
What is the New York Stock Exchange?
• World’s largest market place for securities
• Currently membership limited to 1,366 members.
• Seat obtained by purchasing from existing member
Interesting Fact: How did Stock Exchange begin?
• The Exchange evolved from a group of men who used to meet under a buttonwood tree on what is now Wall Street in 1792 to discuss securities
The Great Bull Market
• Great American stock exchange boom of 1928-1929
• Huge bubble where there were high speculations
• People made many investments to make big money
Stock Exchange Average Rise in Share Prices 1924-1928
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StockExchange
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I. Stock Market Crash• On Tuesday, October 29, 1929, stock prices plummeted.• This became known as Black Tuesday.
General Causes of the Crash
• Rampant over speculation in market
• People holding companies and investment trusts (which by nature creates debt)
• Bursting of Bull Market economic bubble in August 1929
• Large bank loans could not be liquidated
Black Thursday
• On October 18, 1929 prices began to fall
• Panic stuck out on October 24 “BLACK THURSDAY” after the announcements from the Senate
• Record of 12,894,650 shares were traded
Black Thursday (Continued)
• Major banks and investment companies bought up great blocks of stocks to stop the panic but….
THERE ATTEMPTS FAILED!!!!!!!!!
Black Monday and Tuesday
• The Panic continued and 16,000,000 shares were traded
• Prices on the stock market collapsed completely!!!!
Causes of Great Depression
• Agriculture had crashed in 1919 and was a continuing source of weakness.
• Banks over-extended
• Wages had not kept up with profits
• In 1920’s consumers were reaching limits of ability to borrow and spend
Cause’s of Depression (continued)
• Production was declining and unemployment increasing EVEN before the crash!
• Destroyed confidence in the economy
• Down sizing of industry causing unemployment
The Great Depression
• The stock prices in the next three years continued to fall
• By 1932 prices had dropped to only about 20% of there original value
“Cycle of Disaster” – many businesses went bankrupt
Businesses cut production
Workers sufferedfrom wage cuts
and lay offs.
People had little or no money to spend.
Demand forgoods fell.
