An Evaluation Of The Reasons For The Economic

Crisis 1929-33:

Factor 1: Easy Availability of AIMS OF PPT:

Money To Be Able To
Factor 2: Overproduction Discuss the
factors which
contributed to
Factor 3: Under-consumption the economic
(financial) crisis
Factor 4: Unequal Distribution of in America
wealth between 1929 &
1933

Factor 5: Wall Street Crash

• During the 1920s, many Americans believed that the U.S. was a
place of unlimited growth, opportunity, and achievement.
• Americans were earning more money than ever – national income
rose from $61 billion to $87 billion
• Many economic analysts and business executives felt that the
stock market was the key to prosperity and urged American
citizens to invest as much as possible

• To Understand That The Stock Market Boom Of The 1920s Was

Never Going To Last

• To Explain How The Stock Market Was Linked To Banks & The
Crashed Can Be Blamed On The Republican Policies

• The stock market crash of 1929 was a collapse of stock prices

that began on Oct. 24, 1929. By Oct. 29, 1929, the Dow Jones
Industrial Average had dropped 24.8%, marking one of the worst
declines in U.S. history.1 It destroyed confidence in Wall
Street markets and led to the Great Depression
 KEY TAKEAWAYS
• The stock market crash of 1929 was one of the worst in
U.S. history. 

• The three key trading dates of the crash were Black

Thursday, Black Monday, and Black Tuesday. The latter
two days were among the four worst days the Dow has
ever seen, by percentage decline.

• Overconfidence during the Roaring Twenties created an

unsustainable stock market bubble.

• Overnight, many people lost their businesses and life

savings, setting the stage for the Great Depression.
 Easy Availability of Loans
As the 1920s was a fairly wealthy and prosperous time for the Americans,
shares began to rise and were worth a lot of money
It was seen as a quick money-making scheme and after a while it wasn’t
just companies that were involved in it, it was individuals
People would borrow money so that they could buy shares, this was called
‘buying on the margin’
Then when the stick prices were high enough they would sell them, pay
money back to the bank and keep the small fortune they had made
It can be argued that the speculative buying in the 1920s led to the
Depression of the 1930s
Historian Piers Brendon said in The Dark Valley that “Wall Street inspired
visions of boundless wealth.”
Confidence blossomed & buying stocks on margin (credit) became at first a
fashion then a frenzy
It can be argued that this ‘get rich quick scheme’ would only work if the
market continued to rise
The soaring prices of shares did not reflect their true value - this
showed the lack of understanding existed AND that a crash was inevitable
 Crashing Of The Banks
Nearly everyone in America had invested in shares and the stock market was huge
However in October 1929 things started to go wrong
A few of the smarter people and companies began selling their shares in fear of them
going bust
This was when everyone else began to panic and started selling - this led to the ‘run on
the banks’ trying desperately to retain some of their finances
This was known As “Black Tuesday” & $14 million were wiped off the value of shares
Their shares were now worthless & many people had lost all their money
They could not repay bank loans as they had lost everything
Banks were forced to shut as they had no money and people who had had nothing to
do with the stock market but had put their money in banks to save up and keep safe
lost it all as the banks could not give it back as they’d lent it to other people
Jobs, homes, possessions were all lost because of the Wall Street Crash
People even took their own lives because the pressure was too much for them
Some historians argue that the Wall Street Crash was ‘a symptom, not the disease’
and that it was a symbol of how unstable the economy had become during the boom
period of the 1920s
The crash was an economic disaster for the US; it represented the end of the boom
years of the 1920s and the start of the Depression
Between 1929-32, 100,000 businesses collapsed and 15 million became unemployed;
millions lost their savings and pensions as banks went out of business
 WHAT HAPPENED ?
The first day of the crash was Black Thursday i.e. on October 24.
The Dow opened at 305.85. It immediately fell 11%, signaling a stock
market correction. Trading was triple the normal volume. Wall Street
bankers feverishly bought shares to prop it up. The strategy worked.

On Friday, October 25, the positive momentum continued. The Dow

rose 0.6% to 301.22.

On Black Monday, October 28, the Dow fell 13.47% to 260.64.

On Black Tuesday, October 29, the Dow fell 11.7% to
230.07.2 Panicked investors sold 16,410,030 shares.

Black Monday and Tuesday were among the four worst days in Dow
history. They were followed by two subsequent crashes:

A 12.93% drop during the 2020 stock market crash.

A 22.61% decline on Black Monday 1987.
 Wall Street Crash
CAUSE 1
EASY AVAILABILITY OF
MONEY
• Due to easy availability of
credit, borrowed money
had been used by many
investors to speculate
shares
• This is known as buying
shares ‘on the margin’ e.g.
using borrowed money
• CAUSE 2
• OVERPRODUCTION
• Before 1929, American
industrial production
seemed to parallel the
course of the stock
market: it kept going up
• By 1929, many companies
had more plants than they
actually needed, and the
market was saturated with
goods that few Americans
could afford to buy
 Wall Street Crash
CAUSE 3
UNDERCONSUMPTION
• During the 1920s, farmers
borrowed heavily from
banks to pay for new,
technologically advanced
equipment.
• As farmers failed to sell
their surplus crops, they
became unable to repay
their bank loans, including
their mortgages.
CAUSE 4
Unequal Distribution of
Wealth
• Most of the country’s
wealth remained in the
hands of a few people at
the top of the economic
pyramid
• 1929, the Federal Trade
Commission reported that
1% of the American
population possessed over
59% of the country’s
wealth
 NEWS ARTICLES ON THE WALL STREET CRASH

• Earlier in the week of the stock market crash, the New York Times headlines
fanned the panic with articles about margin sellers, short-selling, and the exit
of foreign investors.
• The Dow was already down 30% from its September 3 high, according to S&P
Dow Jones Indices. That signaled a bear market. In late September, investors
had been worried about massive declines in the British stock market. Investors
in Clarence Hatry's company lost billions when they discovered he used
fraudulent collateral to buy United Steel. A few days later, Great Britain's
Chancellor of the Exchequer, Philip Snowden, described America's stock market
as "a perfect orgy of speculation.
• The next day, U.S. newspapers agreed. They quoted U.S. Treasury Secretary
Andrew Mellon who said investors "acted as if the price of securities would
infinitely advance.
• In response, the Dow dropped significantly on both of those days and again on
October 16. By the 19th and 20th, The Washington Post reported a drop in
ultra-safe utility stocks.
• The day before Black Thursday, The Washington Post headlines blared "Huge
Selling Wave Creates Near-Panic as Stocks Collapse," while The Times screamed
"Prices of Stocks Crash in Heavy Liquidation.By Black Thursday, panic had set in
for the worst stock market crash in history
 EFFECTS OF THE CRASH

The crash wiped people out. They

were forced to sell businesses and
cash in their life savings. Brokers
called in their loans when the stock
market started falling. People
scrambled to find enough money to
pay for their margins. They lost
faith in Wall Street.
TIMELINE: Wall Street Crash and The Great
Depression
 KEY EVENTS
March 1929: The Dow dropped, but bankers
reassured investors.
August 8: The Federal Reserve Bank of New York
raised the discount rate to 6%.
September 3: The Dow peaked at 381.17. That was a
27% increase over the prior year's peak.
September 26: The Bank of England also raised its
rate to protect the gold standard.
September 29, 1929: The Hatry Case threw British
markets into panic.6
October 3: Great Britain's Chancellor of the
Exchequer Phillip Snowden called the U.S. stock
market a "speculative orgy."5
October 4: The Wall Street Journal and The New
 KEY EVENTS
October 24: Black Thursday.
October 28: Black Monday.
October 29: Black Tuesday.
1933: President Roosevelt launched the Federal
Deposit Insurance Corporation to insure bank
deposits. After the crash, banks only had enough to
honor 10 cents for every dollar. That's because they
had used their depositors' savings, without their
knowledge, to buy stocks.
November 23, 1954: The Dow finally regained its
September 3, 1929, high, closing at 382.74
 Wall Street Crash
EVALUATION:

Overall, the crash is important in causing the banks to

collapse which massively damaged the economy. By
itself however it was not a sufficient cause of the
depression as it could not have done so much damage
if the banks were not in such poor health due to the
upregulation of the Republicans policies
THANK YOU !!

BY – DEWANSHU GUPTA
ROLL NO – 101865004
BATCH – ENC 3