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The First Stock Market Crash

A number of events have caused drastic changes in the lives of countless Americans. Perhaps the most detrimental crisis Americans ever dealt with was the Stock Market Crash of 1929. On this day, many people lost their jobs, their savings, and their livelihood. The euphoria of winning the First World War suddenly disappeared, and millions were left in despair.

Life After War

When World War I ended, troops returned home and life in the United States went back to normal. Men returned to their jobs, women returned to their homes and their children. Defeating the Germans gave the American people a sense of pride and confidence that allowed them to live a carefree lifestyle. Prohibition was in effect, meaning strict liquor laws were in place that forbid the sale and distribution of alcohol. That didn't prevent the American people from drinking. Speakeasies popped up all over the country, hidden in basements of restaurants or the back closets of general stores. Those who could obtain alcohol by their own means held lavish parties in their homes, spending money because they could. The American people were in the mindset that the war was over, so nothing further could go wrong.

Investing In the 1920's

The economy was booming after the war, and people wanted to invest their money to make more money. Stock prices were on the rise, but American's had no fear - the war was over, there was money to be spent! Stock prices continued to climb throughout the next few years, until they reached an all-time high in 1928. The "bull market," or one in which the prices of stocks are rising, drove Americans to want to invest even more. Everyone wanted to invest, regardless of whether or not they had the financial means to do so. Many turned to lending and credit to invest. Believing they could become rich overnight, many American's sought out stock brokers, who would share the cost of a stock with an investor. This was called buying "on margin." In this way, people could purchase a piece of a stock for 10 to 20 percent of its worth and a stock broker would cover the remainder. As long as stock prices continued to rise, people invested in those stocks made money. When prices began to drop lower than the amount a stock broker loaned, stock brokers wanted their pay, or made a "margin call."

Stocks Explained

When a company makes enough money, they go "public." This means that the general population can by a share or piece of stock in the company. Owning stock in a company gives you certain rights. For instance, you are able to vote to determine who sits on the board of the company. If the company you invested in shares its profits with investors, you are able to earn money. The amount of money paid to you is determined by the amount of stocks you own. There are two types of stock available for purchase; common stock and preferred stock. Common stock is owned by the general public at large and can be purchased, sold, or traded on any business day of the week. Preferred stocks do not have the same privileges that common stocks do, but they do typically pay regular dividends. When people invest in stocks, they run the risk of losing a lot of money.

Black Thursday - Stock Market Crashes

The 1920's were a very popular time to buy stocks. Throughout the summer of 1929, stock prices had reached an all-time high. While housing and steel production slowed and car sales dropped, many experts said that the stock market had finally reached its peak. On September 3, 1929, the Dow Jones closed with the largest numbers in history. In the coming weeks, stocks began to drop, slowly at first, then very suddenly. On October 24, 1929, the New York Stock Exchange hit a major bump. The price of stocks dropped drastically. Millions of people wanted to sell their stocks as brokers placed their margin calls. People began frantically selling their stocks, panicking about all of the money they were losing. Big time bankers stepped in, pooled their money, and pumped it back into the stock exchange. This somehow made an incredible recovery and had people back to purchasing stocks by the end of the day. And so, life went on, until 4 days later when the market crashed again. This time, no one stepped in to save the day.

Black Tuesday - October 29, 1929

Black Tuesday was the worst day in stock market history. Americans could not get rid of their stock fast enough. With so many people selling so quickly, the ticker could not keep up. Prices began to collapse quickly as millions and millions tried to sell their shares. Unsure of what to do, the stock market closed for a few days. When it reopened days later, stocks continued to drop. Over the next 2 years, the stock market would continue to fail, reaching an all-time low in July of 1932.

The Great Depression - Americans Lose Everything

After the crash of the stock market, many Americans lost their faith in the banking industry. Thousands of corporations were destroyed. Hundreds of Americans lost their life savings, and many took their own lives out of desperation. No matter how rich or how poor you were, you lost all means of personal income during the depression. Credit and lending were at a virtual standstill and unemployment rates in the United States skyrocketed. People went hungry without food, and sought shelter anywhere they could when they lost their homes. Food had to be rationed. Americans needed a solution to these devastating problems.

The New Deal

Herbert Hoover was in office as the Great Depression occurred. Frantic and unsure of how to handle such a catastrophic event, his popularity as president quickly diminished. The outcome of the 1933 presidential election heavily influenced by Hoover's suggestion of natural recovery; in which the people supported their government, versus Franklin D. Roosevelt's answer of experimental recovery; where the government supported the people. Americans saw Roosevelt as the man with the answers. Roosevelt comforted millions in explaining "The only thing we have to fear is fear itself." Shortly after his election, Roosevelt implemented the New Deal. Roosevelt established new government acts and agencies to help the country recover from the depression. For instance, the National Recovery Administration was established to bring together labor, industry, and government. Other government agencies provided relief funds to the poor and helped to create jobs for millions of unemployed Americans. While the New Deal did not single handedly end the Great Depression, it did provide Americans with the means to live, as well as dignity and hope for a brighter future.

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