Monday, January 14

WE started presenting today! Assigned blog for this week anything from chapter 14/15 on the Great Depression that interest you that you didn't learn.

What were the causes of the SMC and G.D?

Stock Market Crash:

During the 20's the stock market was booming, the value of stocks continued to climb, and people began to think it would never fall.
Prior to this time period the stock market was only played by the rich.
Because there was so much money to be made, common people began to play the stock market with money borrowed from banks.
- Stocks are a part of a company that can be bought or sold

Causes:

Buying on Credit:

During the 20's it was a new fad
The system worked in a similar way that credit cards work now
there were no real limits on how much people could borrow, this allowed people to acquire large amounts of debt.
Because people were in debt they stopped buying things, and distributing money into the economy
This contributed greatly to the depreciation of stock

Overvalued stocks

Stocks were being sold for much more than they were actually worth.
Investors expected the value of stocks to continue to increase, never considering that eventually the upward trend would cease.

Buying on margin

Allowed more middle class people to invest large amounts of money into the stock market.
They would take out "loans" from investors with the intentions of paying them back with interest when they started to profit from their investments
The fact that so much of the stock market was supported by borrowed money made it very unstable.
Allowed for investors to pay just ten percent of the value of the stocks they purchased at the time of purchase, and pay installments for the other 90%.
Stock market was not likely to continue to be stable when so much was money being borrowed from it

Over production of Crops

1929 the US had a very productive agricultural year
We had and extreme over abundance of wheat, which caused the price per bushel to drop drastically
When the price of wheat dropped, it greatly affected people who had invested in wheat stock

No government regulation

Government had not set good enough regulations for banks
No requirement for minimum capitol to start a bank had been made
No limit to how much banks could lend out had been set
When the market crashed banks that had a lot invested into stocks were wiped out.

Timeline:

October 24th, 1929:
- Known as "Black Thursday". Stock market lost 11% of its value. People began to panic and immediately started to trade in all their stocks. Day of Chaos!!
October 28,1929:
- "Black Monday". News paper articles cause investors from around the country to join the panic and trade in their stocks. Market lost an additional 13% of value.
October 29, 1929:
- "Black Tuesday".

After Effects

Stock market crash greatly contributed to the GD
Not only did the crash affect the us, it affected many countries around the world
The senate organized the Pechora commission to study the causes of the crash

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