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I have chosen this video for two main reasons. The first is that this video talks not only about how the great Depression affected the United States, but how it affected other portions of the world. I have also chosen this video because i found it very interesting how it connected the Great Depression around the world with many leaders that took power in that era. Hitler, Mussolini, and Stalin all took tower within this time period. It also taught me that one of the main reasons that the great depression came to an end was because of World WAR II.

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The Wall Street Crash and the Great Depression

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Overview of the Wall Street Crash in 1929 and the subsequent Great Depression.

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While this photo doesn't seem to fit in I believe it does. I have chosen this photo because many believe that the stock market crash only affected the United States when in reality it affected the entire world.
(Photo wasn't uploading properly as seen below. Sorry.)

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stock market crash of 1929 - Google Search

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I have chosen this video for two reasons. The first of which is because it touches on the fact that people in this era believed that they were "immune" to     many of the mistakes that they had made in previous decades. Secondly it talks about how the government tried to help the situation. President Hover lost the election in 1933 and President Roosevelt took his place. With the unemployment rate at an all time high, Roosevelt put the "New Deal" into action. This was a variety of jobs that would alleviate some of the "despair".

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http://www.globalwaveinvesting.com/ Because of the stock market boom in 1928 investors viewed the market as a place to get rich quick instead of a long term investment strategy.

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I have decided to choose this photo because I believe that it helps illustrate the how many people were out of a job after "Black Tuesday".

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I have decided to post this website because like the first website it helped me understand many of the fundamental reasons that the 1929 stock market collapse happened. This site mentions margin as I previously learned about, but it also told me many other factors such as borrowing all the money from banks to purchase stock. I have also learned that the agricultural market, the construction market, and the automotive market were in a downslope, all major reasons not to purchase stock.

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The 1929 stock market crash was a result of an unsustainable boom in share prices in the preceding years. The boom in share prices was caused by the irrational exuberance of investors, buying shares on the margin, and over-confidence in the sustainability of economic growth. Some economists argue the boom was also facilitated by 'loose money' with US interest rates kept low in the mid-1920s.

These are some of the most significant economic factors behind the stock market crash of 1929.
1. Credit boom
In the 1920s, there was a rapid growth in bank credit and loans in the US. Encouraged by the strength of the economy, people felt the stock market was a one-way bet. Some consumers borrowed to buy shares. Firms took out more loans for expansion. Because people became highly indebted, it meant they became more susceptible to a change in confidence. When that change of confidence came in 1929, those who had borrowed were particularly exposed and joined the rush to sell shares and try and redeem their debts.

2. Buying on the margin

Related to buying on credit was the practice of buying shares on the margin. This meant you only had to pay 10 or 20% of the value of the shares; it meant you were borrowing 80-90% of the value of the shares. This enabled more money to be put into shares, increasing their value. It is said there were many 'margin millionaire' investors. They had made huge profits by buying on the margin and watching share prices rise. But, it left investors very exposed when prices fell. These margin millionaires got wiped out when the stock market fall came. It also affected those banks and investors who had lent money to those buying on the margin.
3. Irrational exuberance
A lot of the stock market crash can be blamed on over-exuberance and false expectations. In the years leading up to 1929, the stock market offered the potential for making huge gains in wealth. It was the new gold rush. People bought shares with the expectations of making more money. As share prices rose, people started to borrow money to invest in the stock market. The market got caught up in a speculative bubble. - Shares kept rising, and people felt they would continue to do so. The problem was that stock prices became divorced from the real potential earnings of the share prices. Prices were not being driven by economic fundamentals but the optimism/exuberance of investors. The average earning per share rose by 400% between 1923 and 1929. Those who questioned the value of shares were often labelled doom-mongers. This was not the first investment bubble, nor was it the last. Most recently we saw a similar phenomenon in the dot com bubble.

In March 1929, the stock market saw its first major reverse, but this mini-panic was overcome leading to a strong rebound in the summer of 1929. By October 1929, shares were grossly overvalued. When some companies posted disappointing results on October 24 (Black Thursday), some investors started to feel this would be a good time to cash in on their profits; share prices began to fall and panic selling caused prices to fall sharply. Financiers, such as JP Morgan tried to restore confidence by buying shares to prop up prices. But, this failed to alter the rapid change in market sentiment. On October 29 (Black Tuesday) share prices fell by $40 billion in a single day. By 1930 the value of shares had fallen by 90%. The bull market had been replaced by a bear market.
4. A mismatch between production and consumption
The 1920s saw great strides in production techniques, especially in industries like automobiles. The production line enabled economies of scale and great increases in production. However, the demand for buying expensive cars and consumer goods were struggling to keep up. Therefore, towards the end of the 1920s, many firms were struggling to sell all their production. This caused some of the disappointing profit results which precipitated falls in share prices.

Rapid growth in Real GDP during the 1920s, couldn't be maintained

In 1929, there were already warning signs from the economy with falling car sales, lower steel production and a slowdown in housing construction. However, despite these warning signs, people still kept buying shares.
5. Agricultural recession
Even before 1929, the American agricultural sector was struggling to maintain profitability. Many small farmers were driven out of business because they could not compete in the new economic climate. Better technology was increasing supply, but demand for food was not increasing at the same rate. Therefore, prices fell, and farmers incomes dropped. There was occupational and geographical immobilities in this sector, and it was difficult for unemployed farmers to get jobs elsewhere in the economy.
6. Weaknesses in the banking system
Before the Great Depression, the American banking system was characterised by having many small to medium sized firms. America had over 30,000 banks. The effect of this was that they were prone to going bankrupt if there was a run on deposits. In particular, many banks in rural areas went bankrupt due to the agricultural recession. This had a negative impact on the rest of the financial industry. Between 1923 and 1930, 5,000 banks collapsed.

Note: If the question was - What caused the Great Depression? The answer would be slightly different. This is because some believe the Stock market crash was only partly to blame for the Great Depression (although it was a significant factor in precipitating it.)
7. Role of monetary policy
Discount Rate - Federal Reserve Bank of NY for US | St Louis

In the mid-1920s, US interest rates were kept low. However, if we look at the very low inflation rate, real interest rates were substantially positive.
US inflation in the 1920s
US inflation rate | St Louis

From 1928, the Federal Reserve began raising interest rates - partly concerned about booming share prices. Increasing interest rates to 6% played a factor in reducing economic growth and reducing demand for shares.
Related

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What caused the Wall Street Crash of 1929? - Economics Help

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The 1929 stock market crash was a result of an unsustainable boom in share prices in the preceding years. The boom in share prices was caused by the irrational exuberance of investors, buying shares on the margin, and over-confidence in the sustainability of economic growth. Some economists argue the boom...

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Fun Photo

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I have chosen to place this video on my padlet board because this video does a tremendous job describing the stock market collapse in a short period of time. The video located below talks about a variety of subjects but mentions one that i have never heard before a variety of times. The Dow Jones Index holds the average price of the most influential stocks and the NASDAQ. This metre can be used to determine weather stocks are doing well, or poorly.

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History Brief: Black Tuesday (The Stock Market Crash)

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Ive chosen this photo because I believe that it perfectly represents the stock market crash, and how people had to do anything they could to survive.

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While the other websites I have produced reference many of the issues that led up to "Black Tuesday", the website sited below references "Black Thursday"through Tuesday and the aftermath of it all. While many have heard of the stock market collapse of 1929 I don't believe that they understand how devastating it truly was. On "Black Thursday" a record 12,894,650 shares were sold, beaten only by "Black Tuesday" which had 16,410,030 shares sold through the New York stock exchange. A new fact that i learned from this website is that 15 million people or 30% of the the american workforce didn't have a job following these events.

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On October 29, 1929, Black Tuesday hit Wall Street as investors traded some 16 million shares on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors. In the aftermath of Black Tuesday, America and the rest of the industrialized world spiraled downward into the Great Depression (1929-39), the deepest and longest-lasting economic downturn in the history of the Western industrialized world up to that time.

1929 Stock Market Crash

During the 1920s, the U.S. stock market underwent rapid expansion, reaching its peak in August 1929, after a period of wild speculation. By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value. Among the other causes of the eventual market collapse were low wages, the proliferation of debt, a struggling agricultural sector and an excess of large bank loans that could not be liquidated.

Did you know? The New York Stock Exchange was founded in 1817, although its origins date back to 1792 when a group of stockbrokers and merchants signed an agreement under a buttonwood tree on Wall Street.

Stock prices began to decline in September and early October 1929, and on October 18 the fall began. Panic set in, and on October 24, Black Thursday, a record 12,894,650 shares were traded. Investment companies and leading bankers attempted to stabilize the market by buying up great blocks of stock, producing a moderate rally on Friday. On Monday, however, the storm broke anew, and the market went into free fall. Black Monday was followed by Black Tuesday (October 29), in which stock prices collapsed completely and 16,410,030 shares were traded on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors, and stock tickers ran hours behind because the machinery could not handle the tremendous volume of trading.

1929 Stock Market Crash and the Great Depression

After October 29, 1929, stock prices had nowhere to go but up, so there was considerable recovery during succeeding weeks. Overall, however, prices continued to drop as the United States slumped into the Great Depression, and by 1932 stocks were worth only about 20 percent of their value in the summer of 1929. The stock market crash of 1929 was not the sole cause of the Great Depression, but it did act to accelerate the global economic collapse of which it was also a symptom. By 1933, nearly half of America's banks had failed, and unemployment was approaching 15 million people, or 30 percent of the workforce.

Relief and reform measures enacted by the administration of President Franklin D. Roosevelt (1882-1945) helped lessen the worst effects of the Great Depression; however, the U.S. economy would not fully turn around until after 1939, when World War II (1939-45) revitalized American industry.
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On October 29, 1929, Black Tuesday hit Wall Street as investors traded some 16 million shares on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors.

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The website that is posted below talks about many of the issues that led up to the stock market crash of 1929. The main issue that this website addresses is margin. Margin from what I have learned is when you purchase a portion of the stock up front (only needed to pay 10% margin) and the broker gives you the rest. An interesting fact that I learned from this website is that during this time Market Manipulation was legal.

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The following excerpt about the 1929 stock market crash is from Understanding Wall Street, written by Jeffrey B. Little and Lucien Rhodes and published by McGraw-Hill.
The "Roaring Twenties" came to a quiet halt on September 3, 1929. The steadily rising stock market, with its well-publicized gains, especially late in the decade, seemed to confirm a popular notion that the United States had entered a "New Era"-a time of "permanent prosperity," and one that might never end. The rapid rise in prices between late 1921 and September 1929, and the violent crash and bear market that followed, are used today as a classic benchmark whenever market observers discuss the emotions of "greed" and "fear."

For some investors during the 1920s, a financial panic was not a totally new experience. The stock market had shut down for nearly two weeks in 1873, and many could recall when J. P. Morgan almost single-handedly halted the panic of 1907. Also, the sharp 46% drop between 1919 and 1920 had not been forgotten.

But almost everyone agreed that the 1920s were very different. This was the new age of the consumer. Radios, air conditioners, washing machines, and automobiles were all being purchased with "buy-now-and-pay-later" plans. By 1929, consumer credit was helping the average family enjoy the prosperity of the day. Business was good, profits were up, and stocks, which were also being purchased on credit, were soaring.

Even though stock prices were reflecting investor optimism, as they normally do, there were also several behind-the scenes factors that contributed to the high equity valuations and to the vulnerability of the stock market in late 1929.

MARGIN ON EQUITIES

Stocks could be bought on 10% margin in 1929. Any investor could purchase shares having a market value of $10,000 with only $1,000 of capital. When stocks advanced, the profits generated were being used to purchase additional shares. This leverage, investors soon learned, worked very much in their favor when stocks were rising-and greatly to their detriment when prices were falling.

Perhaps most surprising was the magnitude of the change in stock market credit. In January 1928, total brokers' loans had reached $3.8 billion. A year later, the figure had risen to $5.3 billion, and it continued soaring to a peak of $6.8 billion in early October 1929. Of course, with the crash, equity credit also declined and was back to $3.4 billion by the end of the year.

STOCK MANIPULATION

The late 1920s saw notorious stock price manipulation. Much activity that was considered legal then is no longer permitted today. In 1929, investor "pools" were formed to trade stocks. The pool would buy the shares, use media contacts to spread favorable news or rumors, and then "paint the tape" with large, meaningless trades among themselves. This would draw attention to the stock, allowing the pool to sell the shares, usually at much higher prices, to an unsuspecting public.

One of the most infamous manipulations of the time was the RCA pool headed by broker-specialist Michael J. Meehan. The pool managed to push up RCA's stock price by almost 50% between the March 8 and March 17, 1929. Then, on the very next day, March 18, the pool sold its entire holdings and divided the profits-about $100 million, by today's standards.
The trading activities, rumored or real, of William Durant, Jesse Livermore, and others were popular topics of discussion in brokerage houses across the country.

Periodically, experienced market observers of the day, including Roger Babson and Bernard Baruch, would warn of the consequences of the speculative market environment. Unfortunately, few people took the warnings seriously because both men had been repeating similar messages for up to two years before the early September peak.

THE 1929 FED

In the months between late 1927 and June 1929, the nation's personal income and industrial production rose steadily. At the same time, wholesale prices (now called "producer prices") remained flat or were declining, as they had been doing for several years following the inflationary consequences of World War I. In addition, President Hoover, in keeping with the mood of the nation's working class, favored a continuation of high tariffs and protectionism. Meantime, the Federal Reserve Board encouraged easier credit.

On March 22, 1929, investors were relieved when the Federal Reserve failed to take action, thus encouraging further speculation. Yet observers seemed unaware of the consequences of the Fed's move in July when it raised the discount rate from 5 to 6%. And it was clear to some that personal income and industrial production were no longer rising. During the two months between the actual peak in the economy in August 1929 and the October crash, personal income and wholesale prices were declining, and industrial production was actually plunging.

Following the crash, the discount rate was quickly returned to 5%, and many declines followed in 1930. By October of that year, production had fallen 26%, personal income 16%, and product prices 14%. In terms of the creation of new money, it can be said that the Federal Reserve was very much "behind the curve" during the 1930 to 1933 period. The death of Benjamin Strong (the New York bank governor and chairman of the newly created Open Market Investment Committee) in 1928 led to a diffusion of leadership when the Fed needed it most.

CORPORATE PROFITS

From 1926 through 1929, the earnings of the Dow Jones Industrial Average climbed 33%, from about 15 to 19.94. Earnings remained strong year to year going into the last quarter of 1929. However, a slowdown was evident in some areas as early as the third (September) quarter of 1929, and the fourth quarter, normally higher than the third, was slipping. A substantial decline in profits occurred in 1930 and in the year following. The Dow Jones Industrial Average posted a loss for the entire year 1932. Not until the third quarter of 1948 did the Dow post earnings greater than it did in 1929.

CORPORATE DIVIDENDS

More than 60% of DJIA company profits were paid out to shareholders in 1929. And in the four years that followed, 1930 through 1933, dividends paid, although lower in each successive year, exceeded the actual earnings of the companies.

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The following excerpt about the 1929 stock market crash is from Understanding Wall Street, written by Jeffrey B. Little and Lucien Rhodes and published by McGraw-Hill. The "Roaring Twenties" came to a quiet halt on September 3, 1929.