Black Tuesday
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Publicado: 24 de abril de 2011
BLACK TUESDAY
1. INTRODUCTION
On Tuesday October 29th, 1929 there was a stock market crash in New York, which it caused a prolonged period of deflation. The crisis quickly moved the entireU.S. economy, European and other areas of the world. One of its most immediate consequences was the collapse of international payments system.
Black Tuesday was the beginning of the Great Depressionbecause the market lost a total of 40%in less than 8 weeks.
Also was a great panic day in Wall Street, one of the world’s leading financial centers. This means that the prices for stock were too highand many people who had borrowed money to buy high- priced stocks went bankrupt.
It was inculcated in the minds of citizens that in the stock market they could only win if they bet the savings of alifetime, and even, people began to buy credit. It was like a big balloon that was slowly inflated with gas from the appropriations granted, without economic data or enough money to prove it.Everything seemed simple and safe: Brokers paid the money to invest by a 10% interest with the guarantee of the purchased securities. This agent was going to a bank and deposited these securities, but itwas such the volume of loans that banks turned to the Federal Reserve to get the money that they left to agents and he did it by a 5% interest. Thus, the stockbroker obtained a gain of 5% while theinvestor obtained the benefits of a stock market that seemed it would always go up to.
However, nobody thought that if the stock exchange dropped, the investor would be trapped and penniless so hecouldn´t pay off borrowed money. The agent couldn´t guarantee his payment to banks and neither the Bank could return money to the Federal Reserve. The final solution would be to sell shares to pay debtsand that would produce a stock market chaos.
2. CAUSES
* Speculation. All the people were having the desire to become rich as quickly as they can. People were enjoying and many clubs...
1. INTRODUCTION
On Tuesday October 29th, 1929 there was a stock market crash in New York, which it caused a prolonged period of deflation. The crisis quickly moved the entireU.S. economy, European and other areas of the world. One of its most immediate consequences was the collapse of international payments system.
Black Tuesday was the beginning of the Great Depressionbecause the market lost a total of 40%in less than 8 weeks.
Also was a great panic day in Wall Street, one of the world’s leading financial centers. This means that the prices for stock were too highand many people who had borrowed money to buy high- priced stocks went bankrupt.
It was inculcated in the minds of citizens that in the stock market they could only win if they bet the savings of alifetime, and even, people began to buy credit. It was like a big balloon that was slowly inflated with gas from the appropriations granted, without economic data or enough money to prove it.Everything seemed simple and safe: Brokers paid the money to invest by a 10% interest with the guarantee of the purchased securities. This agent was going to a bank and deposited these securities, but itwas such the volume of loans that banks turned to the Federal Reserve to get the money that they left to agents and he did it by a 5% interest. Thus, the stockbroker obtained a gain of 5% while theinvestor obtained the benefits of a stock market that seemed it would always go up to.
However, nobody thought that if the stock exchange dropped, the investor would be trapped and penniless so hecouldn´t pay off borrowed money. The agent couldn´t guarantee his payment to banks and neither the Bank could return money to the Federal Reserve. The final solution would be to sell shares to pay debtsand that would produce a stock market chaos.
2. CAUSES
* Speculation. All the people were having the desire to become rich as quickly as they can. People were enjoying and many clubs...
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