The Great Depression: began with soldiers returning home after World War I. Everyone was happy to be back home, and new things were being invented and becoming popular, such as jazz music, radios, cars, movies and more.
As time went on, people started to buy stocks. People would take out loans from the banks, that they promised they would pay back later. First it started out with a few people, but then everyone started doing this, often to buy a car or their first house.
This happened because many people took out loans to invest in the stock market a practice called “buying margin.”
But this epidemic soon slowed down since many people could not pay their loans back. Soon, this spread like wildfire and thousands of people were unable to pay back what they owed. Many thought that it would not get worse, but it did. Oct. 29th, 1929, “Black Tuesday” is referred to by people as the stock market crash of 1929, the day that changed so many lives.
According to a Day in History article, Black Tuesday hit Wall Street on October 29, 1929, when over 16 million shares were traded in a single day. “Billions of dollars were lost, wiping out thousands of investors.” Many investors rushed to sell their stocks as a result, but since everyone was doing it at the same time, it did not prevent the economic downfall that came.
At least 9,000 banks closed during the 1930s, with 4,000 failing in 1933 alone. Many rushed to see what happened to their money in a bank run, but unfortunately, their money had been used by the banks to keep up with the loans that people were taking out, and their savings were gone. To try to save themselves from bankruptcy, many tried to trade their stocks in, but it was to no avail.
According to “Day in history” Panic spread on Black Thursday. A huge number of stocks were traded and people tried to get money back. While bankers tried to stop the crash by buying stocks causing a small recovery on Friday.
Leading banks tried to fix the situation by taking over smaller banks, but public panic was so strong that it caused a massive outflow of funds, overwhelming their efforts to stabilize the system. Many also lost jobs.
In the 1920s, banks lent too much money for people to buy stocks, and when prices fell, many had to sell, making the crash worse. This time period marked a dark time in American history, showcasing how fragile the stock market was. And as a result of the Great Depression, the gap between the rich and poor grew immensely. This teaches people today, including FHS students how small financial decisions can affect the entire economic problem and why we need to be careful with our money without going through another big problem.
