The Great Depression 1929-1939 Introduction:

Transcript:The Great Depression 1929-1939 Introduction::
The Great Depression 1929-1939 Introduction: Roaring Period - the 1920s World War-I ended by the Treaty of Versailles signed on 14th Nov, 1918 The US economy at that time was not so much affected as arms and ammunitions and war tools were manufactured and supplied to the other countries. Besides, it gave loans to countries, So, its economy was good In fact, stock markets were raised by 50% from 1918-1919 America’s GDP (Gross Domestic Product) increased by 4.7% Jobless rate 3.7% Roaring period Continued... Consumer debt increased, companies over-extended themselves, financial institutions became heavily involved in stock market speculation. In some cases, they created securities "subsidiaries" with their own brokers secretly selling their own stocks. Weak regulations had opened the way for a period of wild speculation on stock exchanges. Many investors without proper research of companies, kept buying based on the fundamentals — they were just gambling that the stock would keep going up. Many bought shares on margin, (with just 10% of a stock's price to make a purchase), not realizing the effects if the price fell. Shares were sold for more money than justified by their companies' actual earnings. Overheated market crashed! Stock market crash, 1929 The stock market first crashed on Oct. 24, 1929 - the markets opened 11% lower than the previous day. Then came the Black Thursday-nervous investors sold overpriced shares of (12.9 million) Prices fell again the following Monday. Wholesale panic set in, leading to more selling. On "Black Tuesday," Oct. 29, investors unloaded millions of shares — kept on unloading. There were literally no buyers. The market lost more than 85% of its value from 1929 to July 1932. The Dow Jones Industry’s average sank from 381.17 in 1929 to 41.22 in 1932. This caused economic problems that came to a boiling point. Oversupply and overproduction problems The 1920s were powered by mass production due to consumption boom. But it also led to overproduction on the part of many businesses. Even before the crash, they started selling goods at a loss. In agriculture, farmers had bought more machinery to boost production during W.War-I that put them in debt. In the post-war economy, they produced more supply than needed by consumers. Land and crop values decreased, farmers and investors lost It resulted in price drop of both agricultural and industrial goods and hurt the already over-extended businesses Low demand, high unemployment Loss of