STOCK MARKET CRASH OF 1929

SETTING THE SCENE – THE ROARING 1920S

-Economic boom: rising wages, new consumer goods, mass production.

-Stock prices climbed steadily → millions began investing

-“Everyone can be rich” mentality.

-Buying on margin (borrowing to invest) became common.

THE ILLUSION OF ENDLESS PROSPERITY

-Businesses overproduced goods faster than people could buy them.

-Wealth gap widened — top 5% controlled most income.

-Farmers and some workers were already struggling.

-Market appeared strong but rested on weak foundations.

SPECULATION & CREDIT

-Speculators bought stocks expecting prices to keep rising.

-Banks and brokers lent freely — little oversight or regulation.

-By 1929, stock prices were far above their real value.

-Economy was a “bubble” waiting to burst.

THE CRASH – OCTOBER 1929

-Oct. 24, 1929 – “Black Thursday”: Stock prices began to fall.

-Panic selling spread. Banks tried to stabilize prices — temporary relief.

-Oct. 29 – “Black Tuesday”: 16 million shares sold; markets collapsed.

-Billions in value vanished in hours.

IMMEDIATE CONSEQUENCES

-Investors lost life savings.

-Banks that loaned money for stocks failed.

-People rushed to withdraw deposits → more bank failures.

-Businesses closed, unemployment rose rapidly.

-By 1932: 25% of Americans out of work.

DEEPER CAUSES

-Overproduction of goods

-Easy credit and speculation

-Uneven wealth distribution

-Weak banking system

-Lack of government regulation

WAS THE CRASH THE CAUSE OF THE GREAT DEPRESSION?

-Crash didn’t create all the problems — it revealed them.

-Exposed a fragile economy and loss of confidence.

-Sparked a chain reaction → business closures, layoffs, reduced spending.

-Turning point: prosperity of 1920s → hardship of 1930s.