The exciting and prosperous decade of the 1920s suddenly ended when the world faced a severe economic crisis known as the Great Depression. Most men were unaware of the upcoming crash of the economy and were left penniless. What led up to this catastrophe that not only affected our country but the world, globally? After the 1920’s many people began thinking they could get rich easily by buying stocks. This was the beginning of many unexpected problems such as stock market speculation, the failure of many banks, and the problem of overproduction and underconsumption.
The roaring twenties brought hope to millions of Americans that wanted to get rich. Many didn’t fully understand the risks that came with investing in the stock market. They believed
…show more content…
Due to many people using banks to lend them money in order for them to buy stocks they got into debt. Many investors were unable to pay their loans causing banks to fail. In a New York Times edition in October 29, 1929 (Document 3) it states, “ Stock Prices Slump $14,000,000,000 In NationWide Stampede To Unload Bankers To Support Market Today.” Many banks lent money to speculatory stock investors. When these stocks crashed banks were left without money and many had to close down. People lined outside of banks for hours to try and get their savings money out. This was impossible since banks did not have enough money. Millions of people lost their savings and were unable to get the money they needed to support their families. This also led to a big rise in unemployment. The Historical Statistics of the United States (Document 4) informs us that rates drastically rose from 5.3 to 14.2% of Americans losing their jobs. This happened because so many people lost their money. Businessmen were no longer able to pay all of their employees full time and had to lay off workers that needed this money to feed their families. After losing everything many people completely lost
Rising share prices would simply bring more people into the markets, convinced that it was easy money. In mid-1929, the economy stumbled due to excess production in many industries, creating oversupply. Essentially, companies were able to acquire money cheaply due to high share prices and invest in their own production with the required optimism. By 1933 the value of stock on the New York Stock Exchange was less than a fifth of what it had been at its peak in 1929. Business houses closed their doors, factories shut down and banks failed.
Although the 1920’s were booming and prosperous, the United States soon entered a prolonged economic depression. In October of 1929, prices in the stock market began an uneven downward slide (Document 2). As investors decided that the previous boom in the stock market was over, they sold more stock, thus causing the declination to increase even further. Many citizens of the United States were greatly affected by this. Families who had invested in stock lost most, if not all, or their life savings.
Because the stock market crashed, thousands of individual investors lost their jobs. The decline in the value of assets also greatly strained banks and other financial institutions, especially the ones holding stocks. By 1933, nearly half of America's banks had shut down. Unemployment was going sky high. 15 million people were without jobs.
Leuchtenberg sad, “There was no single cause of the crash and ensuing depression,” [Doc2]. Many things as stated earlier contributed to the crash, such as overexpansion of credit, goods, industries and rising rates of unemployment. Many Americans saw the Stock Market as an easy way to create wealth by buying stocks cheap, usually at a margin, and selling for a higher price, hopeful to profit. Buying on margin was the act of paying some money on a stock, but loaning the rest from a bank who expected would be paid back when profit was made. Stocks became more expensive to the point where nobody wanted to buy them because of their extreme price.
The great depression in the US, which began in 1929, and ended in 1938 was caused by many different things all happening at the same time in the economy. The wall street crash in October 1929 was one of the main causes, when the stock markets crashed. This was caused by many things, but the main reason for it was a deflation (which is an event where the general level of prices in an economy are reduced) On October 24th (black Thursday), share prices dropped by 14 billion dollars in a day, and more than 30 billion in a week. This forced many of the banks to close, due to them investing their client’s savings in the stock market.
They were very upset that the bank lost all their money so the people lost trust in the bank. The stock market crash of 1929 was what started the Great depression. Things just got worse and worse since then. With people losing their money companies lost their money along with it. Companies could not afford to keep and pay all their workers.
Why it happened? There are number of reasons why it happened but to give you a direct debrief some of the reasons were that people were not purchasing enough across the board with the stock market crash people were
Firstly, banks were focusing on making a profit with the new interest in buying and selling stocks. They gave people loans to make these investments, and expected the money back in return with the addition of interest. Additionally, banks tried to get in on the money that the stock market brought. After the stock market crash, people could no longer repay the bank for the money
The Great Depression was an economic crisis in the United States from 1929-1941. The Stock Market Crash was one of the primary reasons that caused the Great Depression. The Stock Market Crash was caused by too many people withdrawing their money from banks at the same time. This happened because they heard that banks were going to close and they didn’t want to lose their money because of that. Banks needed people’s money to use for investments and since they didn’t have any, banks began to close.
Eli Robinson Am Lit 2 3/12/23 1920s Rough Draft 1920s Economics The value of money has grown over the years but only a century ago many Americans were lacking financially. America’s economy was booming for almost all of the 1920s due to the industrial revolution. Many Americans took advantage of this and placed their money in a recently discovered financial stock market. Stocks were new to the public so many did not fully understand how it worked and this led to the loss of so much money.
This led to the Wall Street crash where 9 million people lost their savings and ensued in a bank crisis. Consumerism plummeted and failing businesses laid off workers, where around 12 million people were unemployed by 1932 and the unemployment rate was 33% in 1933. “The Crash exposed the weaknesses that underlay the prosperous economy..” (Leuchtenburg) states how the crash revealed the underlying crippled economy the US had and how it completely shattered the economy. The nature of the Depression was caused through a range of causes and the situation deepened from the
After October 29, 1929, stock prices had nowhere to go but up, so there was considerable recovery during succeeding weeks. Overall, however, prices continued to drop as the United States slumped into the Great Depression, and by 1932 stocks were worth only about 20 percent of their value in the summer of 1929. The stock market crash of 1929 was not the sole cause of the Great Depression, but it did act to accelerate the global economic collapse of which it was also a symptom. By 1933, nearly half of America’s banks had failed, and unemployment was approaching 15 million people, or 30 percent of the
During the great depression, the United States faced one of the hardest economic crises the nation has ever seen. Before this, the economy was rapidly expanding, and people all over the country were investing in the stock market. However this was not sustainable, by 1929 many investors had seen the stock market to be overvalued leading them to mass sell their shares (History.com). This resulted in an economic collapse that affected millions of Americans. First, it puts a halt to the workforce causing many people to be unemployed, and unable to put food on the table, people even lose their homes and life savings.
In October of 1929, the stock market crashed. This caused the business of the world to be in serious trouble. By 1932, 12 million men were without a job, and desperate. The families had a few options during this time. They could either try and find a job, or cut back on their spending.
The Stock market Crash was one of the causes of the Great Depression. One cause of the Stock Market Crash was the stock exchange. This led thousands of Americans to invest in stocks and lose money. Many Americans borrowed money from the bank to buy stocks. Most of the time, people who lost money were unable to pay the banks back their debt; which caused banks to fail.