Today we started to present our presentations.
Causes of the stock market crash:
- Buying on margin- pay 10-20% of stock and borrow rest from stockbrokers
- Overproduction/Underconsumption of goods- businesses producing goods that people weren't buying
- Banks Investing- invested people's money in stock market and ended up closing (people's money lost)
- Stock Pools and Watered Stock- wealthy buy stock for little cost, pay reporters to write about stock, price of stock rose, sell stock at very high prices even though it didn't reflect the state of the businesses
- Unrealistic View of the Market- nobody believed stock would ever fall, "Over Exuberance and False Expectations," stock prices because "divorced" from real potential earnings of share prices
- Weak Banking System- US over 30,00 banks, prone to going bankrupt, high bank failure rate, lost money
- No government rules/regulations about the stock market- led to banks investing in the stock market, buying on margin, stock pools and watered stock
-Federal Reserve increased interest rates- too much borrowing, raised interest rates so that people couldn't borrow anymore, knew that if they raised rates economy would go down
Comments