Great Depression

In: Historical Events

Submitted By stepler
Words 4815
Pages 20
Part I: Pre-crisis time, what caused crisis, reasons of collapse
In 1920s the economic progress in United States seemed everywhere, as Americans emerged from the self-imposed rationing and sacrifice of World War I and went on a buying spree. Millions of people across the country bought their first everything—their first automobile, washing machine, camera, radio, refrigerator. These products came off America’s assembly lines in an endless stream. More people were at work in U.S. factories and production plants than ever before, producing more goods than ever before. The U.S. economy was sometimes compared to an economic miracle. Consumers in the United States were not the only ones to experience good times. U.S. investors had also had a field day. Overseas, U.S. investments nearly doubled from $3.98 billion in 1919 to $7.5 billion by 1929. The New York Stock Exchange, which served for many as the truest indicator of the nation’s economic pulse, enjoyed phenomenal growth, especially after 1923. Stock purchases on the Exchange increased four-fold between 1923 and 1930. And stock sales were only outstripped by the rise in stock prices. Altogether, investment in the stock market and in bonds rose sharper than any other economic indicator during the decade, faster, in fact, than the actual production or sales of manufactured goods.
During the 1920s a would-be investor could make his or her stock purchases largely on credit. Under the rules in place for the New York Stock Exchange, investors could purchase stock through a practice called “buying on margin.” With many stocks increasing in value during the 1920s at an average rate of 25 percent annually, the initial investment of $1,000 might have accrued to a value of $1,250 after being invested for a year. Then the investor might order his broker to sell his shares, pay the broker a fee of $100, and pocket the remaining…...

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