This week marked 89 years since the economic boom and prosperity of the Roaring Twenties came to an abrupt end. On a single day, Thursday 24th October, over 13 million shares were sold and the stock market lost over 11% of its value. The effect this collapse of the stock market had on society, American and overseas, was tremendous and catastrophic, damaging all industries and forcing business closures on a unprecedented scale.
As a result of the Wall Street Crash, over 600 banks went bankrupt in 1929 and the unemployment rate soared from below 3% throughout the 1920s to nearly 25% in 1933. America’s economy became trapped in a vicious cycle as everything began to collapse. As the price of shares fell, less people invested in companies and business incomes fell meaning businesses either had to lay off workers, offer only part time work or shut completely. This, in turn, meant more Americans were earning little, if any, and could not afford to be spending money on consumer goods that had thrived in the economic prosperities throughout the 1920s. This meant companies were met with less demand for their products and therefore production fell meaning, once again, more people lost jobs. As well as this, runs on banks during the stock market collapse, as people feared, rightly so, that they may lose their savings, meant banks had to call in loans from businesses, farmers, brokers and the ordinary person, who had not necessarily achieved the level of affluence required to pay of these loans at such short notice. Loans had been taken out generously throughout the 1920s with low interest rates as a lending ethos was created by schemes such as hire purchase schemes and buying stocks or shares on the margin (investors bought stocks on 90% margin in the 1920s). Consequently, banks closed, unemployment rates soared, businesses’ incomes fell and America was plunged into a Great Depression that would appear impossible to recover from until after the Second World War.
Grace - Upon - Paper 