Black Tuesday Research Paper

There have been many positive events that occurred in the 1920s, however, speculation in the stock market, risky lending policies, overproduction, and uneven income distribution eventually led to the Great Depression. In the late 1920s, a prolonged bull market convinced many people to invest in stocks and by 1929 approximately 10% of American households owned stocks. Buyers also engaged in speculation believing the market would continue to climb thus enabling them to sell the stock and make money quickly. The rising stock prices led to risky investment practices which led to the stock market crash, along with the business of banks. The bull market lasted as long as investors continued to put new money into it. The market started running out of customers and investors began to sell off their holdings. Other investors sold shares to pay the interest on their brokerage loans. Due to the stock market crashing in October 1929, many economic weaknesses of America was found. The unemployment started to rise at an alarming rate. Based off of statistics, the annual high of stock prices was $400 in 1929. The annual low was $200 and since then, it has started dropping rapidly. On October 29, Black Tuesday occurred and prices took

First, by 1929, banks had loaned nearly $6 billion to stock speculators. The second way is that many banks had invested depositors’ money in the stock market, hoping for higher returns that they could get by using the money for loans. This plan failed since the stock values collapsed, leaving speculators defaulted on their loans. With less credit available, consumers and business couldn’t borrow as much money. This sent the economy into a recession. The government did not insure bank deposits, so if a bank were to collapse, even customers who did not invest in the stock market would lose their savings. The bank failures caused a crisis of confidence in the banking