The Great Depression Of The 1920's

On October 29th, 1929, Black Tuesday caused $14 billion of stock value to be wiped out, and 16 million shares to be traded. The stock market crash of 1929 cost the lives and joy of many citizens of the United States and brought the era of development and joy to a halt. “Business houses closed their doors, factories shut down and banks failed. - Approximately one out of every four Americans was unemployed.” The roaring 20s had ended, and the great depression had begun. However, this deterioration was not as abrupt as it might seem. The citizens of America had been building up to this fate for a while until they eventually had to suffer greatly from the consequences. While it is easy to believe the economy during the 1920s was extremely strong

“Borrowing money to buy stock--known as buying on margin--became commonplace. And it was not only the rich executive who bought stock. The average blue-collar worker was able to borrow money to buy stock against the future value of that stock.” The 1920s were considered to have a bull market, a time when prices are rising or expected to rise. Due to the bull market, everyone was borrowing money to buy stocks with the speculation that they would eventually be able to pay that money back. The market became very unstable as more people bought stocks while borrowing too much money. Eventually, the Bull Market turned into a speculative bubble, which would eventually burst in 1929. While every market has some amount of speculation, in the late 1920s, speculation was dominating the stock market. The reason for this is that the line between speculation and investing was not clear to the people at the time. It can be seen that once a speculative bubble forms in the market, the market instantly becomes very fragile with the chance that this bubble could burst. The time when speculation began to dominate the market was most likely a time when people did not understand the decisions they were making and focused too much on the future than on the present. This caused the stock market to lose all its support and therefore could not stay functioning. According to Appendix A, many investors were reaching after speculative bubbles because of how they appeared to be prosperous when in reality that prosperity would be very short-lived. These bubbles coming from the ‘bull’ in the bull market represent how fragile it was, and how easily these bubbles could ‘pop’, hurting everyone who invested in them. At the time, people did not understand the consequences of these bubbles bursting and did not realize the reality