The Causes of the Stock Market Crash of 1929
Storyboard Description
The Causes of the Stock Market Crash of 1929
Storyboard Text
- The Causes of the Stock Market Crash of 1929
- In 1929, the stock market crashed. This was the worst economic event in world history. What caused this incident to occur?
- Cause #1: A stock market peak occurred just before the crash. The U.S. economy and the stock market experienced a big expansion in the "Roaring Twenties".
- Cause #1 cont.: The market peaked on Sept. 3, 1929. Many working class citizens bought stock investments. Some of them got stocks "on margin". This meant that they only paid a small part of the stock's value and borrowed money from a bank to pay off the rest. Additionally, the U.S. unemployment was low and the car industry was thriving.
- Cause #2: The market and the public were over confident. The stocks were overpriced and a collapse was about to happen. The market was growing which led to consumer overconfidence. After 1922, the stock market increased by about 20% each year until 1929.
- Money!
- Cause #3: The government raised interest rates. A few weeks before the stock market crashed, the Federal Reserve Bank of New York raised the interest rate from 5% to 6%. This change affected the market's stability and it reduced economic growth. Farmers had a hard time making an annual profit for their businesses. Some people think that this agricultural problem affected the financial state of the U.S.
- Oh no! I don't have enough crops to sell.
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