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Do now. If you lost all your money in the stock market, what would you do?. Appearance of Prosperity. For people on the outside looking in, the American economy looked great 1922-1928: Gross National Product rises 30% Thus, companies were mass producing goods

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Do now

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  1. Do now If you lost all your money in the stock market, what would you do?

  2. Appearance of Prosperity • For people on the outside looking in, the American economy looked great • 1922-1928: Gross National Product rises 30% • Thus, companies were mass producing goods • Example: 1 in 5 Americans owned a car • Rubber, Glass, Metal industries all flourished as well

  3. Unemployed? Not here….. • From 1923-1929: Unemployment rate 3% • Employees worked less and got paid more due to welfare capitalism • Many were able to: • Buy the products they produced • Go to movies • Go to sporting events

  4. So, What’s a stock? • With all this extra money, ordinary Americans invested in the stock market • Stock: 1 share of ownership in a company • If the corporation does well, the value of the stock goes up • If the corporation fails, the value of the stock plummets

  5. Why did people invest? • Stock market was flourishing in the 1920’s • Value of Dow Jones Stock Exchange quadrupled • Many people began investing their life savings in the stock market • Number of stocks trade on the market goes from 318 million to over 1 billion stocks in the 1920’s

  6. Election of 1928 • Herbert Hoover, Republican • Alfred E. Smith, Democrat

  7. Hoover vs. Smith • Hoover: • Shy, Quiet • Quaker • Supports Prohibition • Smith • Outgoing • Catholic • Against Prohibition

  8. Results

  9. Economic Weaknesses • Uneven distribution of wealth • 1% of Population hold wealth • Americans bought goods on credit • Radios, TVs, Etc • By end of decade, people reach end of credit • Buying stocks with credit also • Stocks rise sharply due to this • Known as buying on margin

  10. The Federal Reserve • Serves as the Nation’s Central Bank • Decides to make it harder for brokers to offer stocks on margin- do not give money as loans to brokers • However, Companies decide to make loans to brokers instead

  11. Warning factors of the Crash • Sales of goods sagging • Rumors were that investors were going to pull their money out of the market

  12. Black Thursday • October 24th, 1929 • Some investors began selling stocks • Others noticed the activity • They begin selling • Huge sell-off had begun. Nobody bought the stocks, Prices plunged.

  13. To stop the collapse….. • House of Morgan: Wealthy Investors • Buy up all the stocks to stop the panic, • However, they sell stocks at the start of the day on Monday, 28th • On Tuesday 29th, panic ensues again • Known as Black Tuesday • Market’s value drops 16 Billion Dollars

  14. Effects on the Nation • People lost millions • Many invested life savings in market • Many banks closed • Made loans to Stockbrokers and invested in the market • Businesses closed • Banks could not make loans, people could not buy goods • As a result, businesses could not hire people

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