The_Technician
Active member
Stock Market Crash of 29.
The crash followed a Speculative boom that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market, a significant number even borrowing to buy more stock. By August 1929, brokers were routinely lending small investors more than 2/3 of the face value of the stocks they were buying. Over $8.5 billion was out on loan, more than the entire amount of currency circulating in the U.S The rising share prices encouraged more people to invest; people hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble. The average P/E (price to earnings) ratio of S&P Composite stocks was 32.6 in September 1929, clearly above historical norms. Most economists view this event as the most dramatic in modern economic history. On 10/29/29 (with the Dow just past its 9/3/29 peak of 381.17), the market finally turned down, and panic selling started. 12,894,650 shares were traded in a single day as people desperately tried to mitigate the situation. This mass sale is often considered a major contributing factor to the Great Depression. Some hold that political over-reactions to the crash, such as the passage of the Smoot-Hawley Tariff Act through the US Congress, caused more harm than the crash itself. According to "Thomas K. McCraw, a professor at the Harvard Business School," the -Hawley Tariff Act "...exacerbated the problem by preventing Europeans from selling enough goods in the United States to earn enough dollars to pay off their debts from WWI.
The main question is: Did the "'29 Crash spark The Depression or did it merely coincide with the bursting of a credit-inspired economic bubble? The decline in stock prices caused bankruptcies and severe macroeconomic difficulties including business closures, firing of workers and other economic repression measures. The resultant rise of mass unemployment and the depression is seen as a direct result of the crash, though it is by no means the sole event that contributed to the depression; it is usually seen as having the greatest impact on the events that followed. Therefore the Wall Street Crash is widely regarded as signaling the downward economic slide that initiated the Great Depression
So How does this coincide with the lack of buying power Americans experience today?
Lack of purchase power...... leads to lack of sales, lack of need to produce product, loss of employment.
Response, reduce costs to produce....tied to energy....raises costs to produce, reduce interest rates (done), reduce corporate costs/profits, basically, jump to lower levels in most aspects to insure the future.
Or it could be 20-30 years before a full recovery comes again.
It might be your last merry one for a while.:worried:
