THE WALL STREET CRASH: WHAT CAUSED IT?

- 1920s prosperity = belief bull market would never end 

- + Speculation in the stock market: values rising from $34bill 1925 - $64bill 1929

- Stocks brought 'on the margin' at 10% of the share price - prices went up the shares could be sold, prices fall = can't pay back loan

- Prices driven by overconfident investors> eco fundamentals = overvalued shares

- Dissapointing results = panic selling shares - 12.8mill sold: "Black Thursday", market shrunk 50% in 6 weeks (24th Oct)

- Prices fell: can't pay back loans, can't get money back, bankruptcy 

- Florida's 1920s housing boom: but lack of infrastructure etc, 1926 hurricane ruined investing 

- market collapse negatively affected consumer and investor confidence - prelude to the W.S.C

- Rates at 3.5% in 1927, encouraged borrowing BUT money went on shares and property> loans and industru - limiting eco growth

- 'Call loans' = borrowing to buy shares, only if profitable share prices rose, if fall, borrowers can't afford to pay back loans - BAD DEBTS

- 2/3s of US banks operated outside the Fed Reserve Boards reulations = more high risk lending (with the no pay back loan consequence)

- 1925-28, 5,000 banks out of buisness = loss of saving and reduce industry growth - orgs relied on banks for loans 

- disparity between supply and demand - destabilised econ and contributed to the crash

- uneven distrivution in wealth: top 5% owned 33% of the wealth

-  Prosperity ending with decrease of consumer spending 

-  Loss of foreign markets - effected farmers and exports to EU +300% plus surplus of food which couldn't be sold abroad - 66% of farmers operated at a loss

- Surplus goods = price an val fall - company loss and price of share drop = CRASH

-Hire purchase - after share drop - can't pay!

• Refused to regualte 

• tax so low can't bail out or restart econ

• high tarrifs EU  don't want to trade with them