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How Did The Stock Market Affect The Economy In The 1920s

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Glamor, drinking, optimism, flappers, and prosperity all describe the 1920s. It was a period following the United States' involvement in World War I from 1914-1918. The US had successfully entered the war in 1917. Their effort and contribution helped win the war and shaped US attitudes for the next decade. The stock market value increased after the war, and it reached record-breaking highs. This high plummeted near the end of 1929. During a time of excitement and hope, behind the scenes, the stock market crash was brewing, which would shock, impact, and change the American economy. Following a decade named “The Roaring ’20s,” the stock market crashed on October 29, 1929. After World War I, America was high on patriotism and nationalism. The shock and victory affected the US society; there was a sense of pride ringing throughout the nation. This pride was evident as America had tremendous economic growth as the nation's total …show more content…

Just a month prior to the crash, the stock market reached a historic high on September 3, 1929. The historic high was due to Americans' ability to invest in the stock market by buying on a margin. The practice of buying on margin allowed a person to acquire stock by paying in cash only a portion of the price of a stock, typically as little as 10 percent and the balance was covered by a loan from a broker (Riggs). By early October, the signs became clear the economy could not support the stock market numbers. Linda Paulson, “Stock Market Crash” displays that with the rise, “home building had declined, the farming industry was deteriorating, production lines slowed, and stocks began to decline.” It was clear to any American the economy was in terrible shape and declining rapidly. In fear of what was to come, investors started to sell shares rapidly. Despite their efforts to correct the market, it crashed on October 29, 1929, by 37.5

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The economy of the United States expanded greatly through the 1920 's reaching its climax in August 1929. By this point, production had already declined and unemployment was at an all-time high, leaving stocks to imitate their real value. During the stock market crash of 1929, better known as Black Tuesday, investors traded vast numbers of shares in a single day, causing billions of dollars to be lost and millions of investors to be eliminated. This "crash" signaled the beginning of a decade long Great Depression that would affect all Western industrialized nations; a crash that would later become known as one of the darkest, longest lasting, economic downturns in American history. People all around the world suffered greatly as personal income,

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In October of 1929, there was a stock market crash bigger than the American people had ever experienced before. The crash was caused by speculation and buying stocks on margin. Once the stockholders realised that the prices were inflated, they tried to get out and sell. This caused the stock market to lose six-sevenths of its original value (Fischer 3/16). Since the stockholders were buying on margin, they lost everything they had when the prices fell.

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