STOCK MARKET COLLAPSE!
Trey S, Michael S, Kristen W
The debt piles up...
- Caught up in the cloud of popularity , many people attempted to get involved in spite of their inability to afford it. They often bought stocks "on margin;" this was certainly a seductive but dangerous business-- a buyer would invest some his own money in a stock and borrowed the rest from a broker.
- If the price of the stock ended up falling lower than the loan amount, the broker would typically issue a "margin call"-- and the buyer would be forced to find some way to pay back the loan immediately. This, in turn, pushed many people deeper into debt than ever.
Trouble in Jazz Age Paradise?
By early 1929, people across the United States were scrambling to get into the stock market. The profits seemed so assured that even many companies placed money in the stock market. Banks even started putting customers' money in the stock market without them knowing.
In March of 1929, the stock market took the blow of a "mini-crash". As prices started dropping, people were panic-stricken as more margin calls were issued.
There were additionally other signs that the economy was heading downhill; its degradation began to take its toll on businesses. Steel factories' production decreased and building construction slowed.
These warnings were all ignored.
The Stock Market plummets
- On October 29th, 1929 (known as "Black Thursday"), stock prices started plummeting and vast numbers of people started selling their stocks-- 12.9 million in all, twice that of the previous record. Hundreds of thousands of margin calls were issued.
- Panicked citizens rushed the banks and tried to save what money they had left. Without funds or investors, dozens of banks failed and billions of dollars in value simply disappeared. Even after the panic simmered down that afternoon, the Stock Market fell again four days later.
Q and A!
What was the difference in stock prices from 1920 to 1929?
- How do you account for the dramatic change in stock prices from 1929-1932?
The collapse of the Stock Market in 1929 led to mass withdrawals and bank failures, causing stock prices to plummet.