DO NOWIf 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

Example: 1 in 5 Americans owned a car Rubber, Glass, Metal industries all

flourished as well

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

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

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

Election of 1928 Herbert Hoover, Republican

Alfred E. Smith, Democrat

Hoover vs. Smith Hoover:

Shy, Quiet Quaker Supports Prohibition

Smith Outgoing Catholic Against Prohibition

Results

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

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

Warning factors of the Crash Sales of goods sagging

Rumors were that investors were going to pull their money out of the market

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.

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

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