wall st crash

CAUSE Federal reserve banking system was out of date

by the 1920, system was outdated as banks could regulate themselves without much government intervention- encouraged more speculation and unsustainable practices

• The federal Reserve board favoured low interest rates to keep the market buoyant - this encouraged easy credit

Federal Reserve Board acted in the interest of

bankers, not the nation and everyday people

CAUSE availability of credit

eg, use of hire purchase

• the practice of using credit to buy shares ‘on the margin’

buying on the margin

about 75% of the purchase price of shares was borrowed (using credit) - this created artificially high prices

CAUSE over speculation of the stock market

more and more americans purchased stocks, ‘even the shoeshine boy’, causing rising prices and a bull market

value of stocks on the Market 1925

$27 billion

value of stocks on the market 1929

$87 billion

Rumours surrounding Federal reserve tightening credit facilities, making it difficult to borrow

Autumn of 1929 - this rumour caused panic, including rumours that successful traders like Bernard Bauch were selling their stock

1928 drop in market confidence

shares did not rise as much in previous years due to falling profits - a warning before the crash ignore due to greed

Black tuesday date

Tuesday 29th October 1929

Black Tuesday events

• worst day ever on the stock market, nearly 16.5 million shares traded, shares lost all value

notable suicides due to the crash

President of Union Cigar commited suicide, his stock fell from $113.50 to $4 in one day

effects of the crash

led to the collapse of credit with loans called in and new ones refused, causing a credit squeeze and fall in demand in business activity

• the economy slowed, loss of confidence destroyed US economy and moved it into a depression

historian stance on the Wall St Crash

few agree that it was the sole cause of the Great Depression - whilst it was a key cause of crisis in the banking sector, by 1930 the system was relatively back to normal

April 1930 avg. industrial stock prices

avg, industrial stock prices back to the same and the system returned to normal - yet the depression continue, suggesting that the stock market was not the primary cause