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Finnancial Collapse - Coggle Diagram
Finnancial Collapse
A flawed U.S. economy
Uneven distribution of wealth
The richest 5% had ahold of 33% of all personal income
Families were too poor to buy any of the goods being produced
Overproduction of business
Factories laid off workers
Overproduction of agriculture
New farming equipment and scientific advancements increased crop production
Farmers couldn't pay off their debts
Why might the Americans have been buying less in the years preceding the stock market crash?
They were used to consuming less like in the previous war
What major weaknesses had appeared in the American Economy by 1929?
America was producing near half of the worlds industrial goods
The money was poorly distributed
How did Margin buying contribute to the stock market crash?
Many middle-income people began buying stocks on margin.
This means that they paid a small percentage of a stock's price as a down payment and borrowed the rest from a stockbroker.
This system worked well as long as the stock prices were rising. If they fell investors would have no money to pay off the loan.
In 1929, Some investors began to think stock prices got unnaturally high. They started selling their stocks, believing the prices would go down.
Everyone wanted to sell their stocks and not buy any. A record breaking 16 million shares of stock were sold. Then the market collapsed.