El crack del 29 y la Gran Depresión

0:00 The crash of 29 was the most devastating stock market crash in the history of the American stock market. Many people went bankrupt and lost everything. This crash was followed by a severe economic crisis known as the Great Depression. In this video we are going to tell the story that we thought would never happen again. Wednesday, October 23, 1929, prices plummet in the stock market on the New York Stock Exchange, the New York stock exchange located at 11 Wall Street, and investors are surprised and worried. For years, stock prices had been rising. That Wednesday was followed by Black Thursday. Suddenly the New York Stock Exchange was filled with people who wanted to sell instead of buy. They say there was screaming, crying and pushing in the park; In the nearby streets, a large crowd gathered. To understand crack

0:48 we must go back an era. In 1919, the United States emerged as the leading power after World War I. The United States was experiencing a very rewarding and pleasurable stage in its history, which they believed would last forever. It was the happy 1920s. American factories produced products for old Europe. To finance the war, the state allowed bonds called "liberty bonds". If you paid for these bonds, the State returned the price with interest. For the first time, citizens saw that they could get interesting returns on their savings. Thus, Charles Michel, president of the city's national bank, seeing that a public with a tendency to invest had just been created, decided to put bonds or corporate shares on the market and told the agent that they were reliable investments with little risk.

1:38 Soon, banks began launching new financial products allowing people to access capital. For the first time, "buy now and pay later" is implemented. Access to credit was very easy, and everyone, from a bank manager to a shoeshine boy, could get into debt and live beyond their means. The newly created "Federal Reserve" in 1922 was largely to blame for this credit expansion , lowering interest rates to historically low levels. An inflationary bubble appeared. The stock market at that time was a market in which only experts invested, very restricted to the public and was accommodated as a competitive market. Following the laws of supply and demand at

2:24 this time the speculative market opened up to everyone, everyone wanted their share. Michel opened brokerage firms across the country. They were places where you could invest in the stock market; The values were updated every second and you had to go there to be able to buy or sell. There, they provided you with a paper to validate your purchase or sale and this should be kept, and it reached the hands of all kinds of people in the US. People were delighted. A growing market was created that seemed like it would never go down. In the decade, large profits were obtained with small capital. The situation was further embellished by the sale of shares on credit. If you wanted to buy shares, you borrowed money at a very low total interest rate, since in a growing market, when you sell you would end up recovering your capital, and making a profit.

3:15 The world was in debt and the agencies allowed 1 to 10 leverage, that is, investing a sum ten times greater than your actual capital. It is estimated that two-thirds of Wall Street stocks were purchased with borrowed money. The stock market rises or falls governed by the law of supply and demand, that is, what people are willing to pay. Here, demand has grown unprecedentedly. In view of the great profit everyone was making, people didn't care how much they paid for shares, as long as they went up. This excess demand caused values to grow and grow out of control, no matter what company it was, it didn't matter why they went up, they always went up! So the stock price began to inflate away from its real values. This is how bubbles are created.

4:01 Paul Warburg, an American banker, warned of the bubble that had been created, and warned of a huge depression, but no one wanted to hear him. No one listened to the people who wanted to step on reality, everyone was wrapped up in their American dream. They continued to invest heavily and the bubble grew. There was a time when some professional investors realized that the market was overshooting its limits. The most professional and astute ones emerged, like Kennedy, the father of the man who would later become president of the United States. He even said: "If a shoeshine knows as much as I do about the bag, maybe it's time for him to quit." Thus we reach the peak and inflection point of the bubble. The stock trend reversed slightly,

4:47 the market became more volatile, and unrest increased. The entire bubble was caused by citizens' overconfidence and when that confidence falls there is nothing to be done. On Wednesday, October 23, 1929, the stock market suffered a major blow when it fell nearly 7 percent in a single session. That day was only a harbinger of what would happen the next day, the fateful and remembered Black Thursday on Wall Street. Thursday, October 24, 1929 A selling frenzy was unleashed, so in a few minutes sales orders were placed for a million shares. The prices of those shares were falling, and packages of shares were offered at a third of their value without finding a buyer. Stockbrokers were desperately asking for collateral for securities that had previously been purchased on credit

5:36 but obviously no one could cover them. Rumors of suicide began to circulate. People jumping from skyscrapers. And people on the street, curious, began to enter the facilities. The panic was enormous. The New York police had to take positions to prevent possible riots. The bubble had already burst and the popular reaction was "this can't be happening." At noon, the main bank heads met to try to resolve the situation. The meeting was attended by Thomas Lamont as a representative of JP Morgan Chase; Albert Wiggin Chase National Bank Representative; they choose Richard Whitney, vice president of the New York Stock Exchange to act on their behalf. To stop the fall, they

6:22 inject money into a series of securities that should be reliable, known as "blue chips." Billionaire John Rockefeller is doing the same, hoping the trend will change. They succeeded. The stock market started to rise. An intervention in values by powerful people had managed to reverse the hemorrhage of prices. They invested large amounts of money to track the values and rebuild investor confidence. The market rose and even the newspapers announced that the stock market crisis was over. But this injection of confidence was not enough. After a recovery on Friday and a small one on Monday, we arrived on Tuesday, October 29, 1929, known as Black Tuesday. The stock index fell more than any other trading session in New York history.

7:11 The declines continued until January, when they bottomed out. The government, chaired by the Republican Herbert Hoover, does not know how to stop the coup. Consequently, many people went bankrupt. The banks too, as they cannot recover the money borrowed. They closed because millions of people were no longer accredited and lost the savings held in those same banks. 3,000 of them closed in the following two years. After that, people kept the money under their beds. Many factories have launched a shutdown. Impoverished neighborhoods began to appear throughout the country, and as happens in all downturns, it eventually reached South America, Europe, and even Australia.

7:56 England closed its borders and abandoned the Gold Standard. Unemployment rose in France and England. Social unrest and tension, a product of the economic crisis, has soared in Germany. A new Austrian soldier began to make his way as the symbol of economic salvation and German power. His name was Adolf Hitler. [Subtitles in Galician by Séfira González Sequeiros]