1920s

Topics: Stock market, Money, Wall Street Crash of 1929 Pages: 2 (429 words) Published: March 24, 2014
The 1920s had seen robust economic growth in the United States. Mass-production techniques and the growing availability of electricity allowed industries to increase their output—and profits—dramatically. Employment levels surged, and many workers saw improvements in their standards of living. Consumer demand for new products also drove creation of new loan programs: for the first time middle-class Americans were able to purchase such goods as refrigerators, washing machines, and automobiles by making payments, rather than by paying cash up front. Many people, optimistic that prosperity would continue, borrowed heavily, certain that they would be able to pay back the loans. By the end of the decade the stock market had become a major influence on the economy. Investors were being richly rewarded as stock prices increased, which caused some observers, including President Herbert Hoover (1874-1964), to worry about "speculation"—when overly optimistic investors buy stocks rashly, driving their prices higher than their actual value. One reason for the concern was the common practice, by both individuals and companies, of buying stocks with money borrowed from banks. Investors also bought stock "on margin," an arrangement that allowed them to make a small down payment (often as little as 10 percent) on a stock purchase. The remainder of the balance would conceivably be paid by the future increase in the value of the stock. Margin purchases allowed many people to invest heavily in the stock market without using much of their own money.

During the autumn of 1929 the stock market became erratic, with stock values dropping unexpectedly and then recovering. Suddenly on October 24, 1929, a frenzy erupted as people tried to sell stocks they thought might be overvalued. The day became known as Black Thursday. The following day the market rebounded somewhat; nevertheless, the recovery was short-lived. On Tuesday, October 29, frantic sellers sold their stocks for prices far...
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