The Wall Street Crash

• Causes:

  • Combined value of shares on Wall Street was around $34 billion.

  Rising to $64 billion by 1929.

  • Shares were rising because many people were buying shares and there was little business success in correlation.
  • Many people buying and selling shares

  (increased demand and heightened prices)

  • Americans had great confidence in their economy, believing that prices would keep rising, prepared to keep buying shares
  • A bull pool encouraged inexperienced investors to speculate, artificially increasing prices.
• Bull pool: Group of traders who artificially increase price of a share by repeatedly buying and selling it between themselves

  Speculate: Buying goods and shares on expectation price will rise in short term, with a view of selling them on.
• The stock market had risen throughout the 20s due to speculation and republican policies.

  Others followed suit and panic replaced confidence.
• Key events:

  September 1929 - Average share prices om the NY stock exchange at their peak.

  Early October 1929 - Around a million shares are traded each day, and prices begin to fall

  24 October 1929 (Black Thursday) - 13 million shares traded, rapid drop in price. Team of leading bankers buy up shares in around 20 companies to try and aid the situation.

  29 October 1929 (Black Tuesday) - after a brief recovery, 16 million shares are traded: highest number so far

  13 November 1929 - Share prices reach their lowest point
• Immediate consequences:

  • Directly affected investors as share values continued to drop

  (Shares had lost around $26 billion in value) - 1/3 of their worth in September.
• Immediate consequences for investors:

  • Had to take money from savings to pay back what was owed (put considerable strain on banks - banks too often had invested money which they needed to pay back)
  • Some had to sell their possessions to regain this money
• Immediate consequences for banks:

  • Banks had to cope with liquidity - Customers demanded cash, but banks don't keep all literal money in safe, they too invest in stock markets
  • Banks also made losses from stocks, along with everyone else in 1929
  • Many banks had no other option but to close down