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US History timeline & concept chart: 1900-1940: Difference between revisions
US History timeline & concept chart: 1900-1940 (view source)
Revision as of 23:44, 8 March 2024
, 8 March→1920s: Wilson, Harding, Coolidge & Hoover administrations
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Leads to Great Depression | Leads to Great Depression | ||
Stock Market Crash causes | |||
* over-speculation | |||
* overly optimistic investor reaction to strong economic growth in early 1929 (net profits of traded companies in first 6 months of 1929 rose 36.6% over same period prior year) | |||
* stock buying on margin (using borrowed money) | |||
* called "margin buying" | |||
* Oversupply of "winter wheat" over the winter of 1928-1929 led to drop in prices | |||
* stock prices reacted with a drop in June, 1929, but "stags" -- amateur investors" jumped in over the lower prices | |||
* speculation exploded | |||
* as of Aug, 1929, brokers loaned up to 2/3rds the stock price | |||
* more money was loaned for the market than the amount of currency circulating in the U.S. | |||
* meanwhile, wheat prices continued to decline | |||
* Average P/E ratio hit 32.6 n Sept. 1929 | |||
* "Circular money" or "trading" led to increase in prices without any real increase in actual funds or new inflows of capital (outside of loans) | |||
* "circular trading" leads to "speculative bubbles" | |||
* By mid-1929, autos, houses, steel and other production benchmarks commenced to slow or decline, as overproduction begam to impact inventories | |||
* part of the overproduction was caused by a drop in overseas sales due to the collapse in bond markets in Europe (banking sector) | |||
* 16% of American households had investments in stocks | |||
* In October, 1929, in response to a 1928 Federal Trade Commission (FTC) report on fraud and unfair trade practices among electrical companies, which were controlled by holding companies (trusts), Congress proposed legislation to regulate the public utilities industry; as a result, the sell-off commenced, forcing margin-buyers to cover loans by selling at lower and lower prices. | |||
* In August 1929, the Federal Reserve raised rates from 5% to 6%, which made it more expensive to take loans | |||
* as the market declined, a "liquidity crisis" followed, under which investors were unable to secure new loans or cover the value of existing loans, i.e., their portfolios were "not liquid" and could not be easily converted into cash without selling at lower and lower prices.<br /> | |||
* see https://time.com/5707876/1929-wall-street-crash/ | |||
- Hoovervilles: shantytowns of unemployed, named for President Hoover | - Hoovervilles: shantytowns of unemployed, named for President Hoover | ||
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=== subheading | === subheading | ||
* >>details | * >>details | ||
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