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Financial Collapse - Coggle Diagram
Financial Collapse
The Stock Market Crashes
In 1929, New York City’s Wall Street was the
financial capital of the world.
Banks and investment companies lined its
sidewalks.
At Wall Street’s New York Stock Exchange, optimism about the
booming U.S.
the economy showed in soaring prices for stocks. To get in on
the boom
many middle income people began buying stocks on margin.
This meant that they paid a small percentage of a stock’s price as a down payment and borrowed the rest from a stockbroker.
The system worked well as long as stock prices were rising.
However, if they fell, investors had no money to pay off the loan.
How did Margin buying contribute to the stock market crash?
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A flawed US economy
Why Americans have been buying less in the years preceding the stock market crash
Some investors began thinking that that the stock prices were unnaturally high. In response they decided to selling their stocks believing the prices would go down soon.
A panic resulted when when the gradual lowering of stock prices had become an all-out slide downwards. Everyone started selling their stocks and no one wanted to buy. The market collapsed when prices plunged to a new low.
Major weaknesses that appeared in the American economy by 1929
There were several weaknesses in the U.S. economy which included uneven distribution of wealth, overproduction by business and agriculture, and the fact that many Americans were buying less.
Crisis
If we went through a depression now could it be worse than The great depression?