US Economic Challenges in the 1920s

Industries like coal mining struggled during the 1920s due to low production, falling profits, and job losses. This led to higher unemployment and a widening wealth gap, with over 42% of people living below the poverty line.

Despite 60% of the population being involved in agriculture, farming struggled in the 1920s. Overproduction caused by new machinery like tractors led to falling prices and profits, pushing some farmers into bankruptcy.

The Republican government followed a hands-off approach to the economy, not intervening to help struggling industries like farming. This inaction hampered their survival.

The Republican government used tariffs to protect American goods, but this backfired as other countries retaliated with their own tariffs, making it hard for American farmers and businesses to sell their goods abroad.

Overproduction led to a surplus of consumer goods like cars and appliances. The large wealth gap also meant many people couldn't afford these items, leading to a slowdown in the economy.

The lack of government oversight over banks allowed many small banks to make risky loans, especially for speculation. When borrowers couldn't repay, banks failed, leading to instability in the financial system.

Many people invested heavily in the stock market, believing the economic boom would continue forever. This overconfidence led to risky investments and created a fragile bubble in the market.

The overproduction of consumer goods led to too much supply and not enough buyers, resulting in falling prices and profits for businesses.

People borrowed heavily to invest in the stock market, assuming profits would continue. This made them vulnerable to debt if the market crashed.

Decreased farm profits meant less money for farmers and related businesses, contributing to the overall economic decline.

A large gap between the rich and poor existed, with many unable to afford consumer goods, contributing to market saturation.

Banks lent recklessly to speculators, even those who couldn't repay. This created a risky financial system.

Many banks closed due to bad loans and lack of regulation, hindering businesses from borrowing money and causing further economic decline.

A decline in car sales indicated people couldn't afford consumer goods on credit, pointing to a weakening economy.

Industrial output decreased, signaling companies were producing less and laying off workers, further impacting consumer spending.

In 1929, companies spent a massive $3 billion on advertising to encourage people to buy more goods. This was a sign of a struggling economy where companies needed to artificially boost demand due to falling profits.

Speculators were ordinary people who borrowed money to buy shares in companies, hoping to profit from rising share prices. They typically used a small portion of their own money and borrowed the majority from banks.

Speculators used a process called 'buying on margin'. They put down a small percentage of their own money (usually 10%) and borrowed the rest (90%) from banks to purchase shares.

Speculators bought shares hoping they would increase in value, allowing them to sell them at a higher price, repay the borrowed money, and keep the profit.

By 1929, there were 20 million speculators actively buying shares. Their actions drove up share prices, creating a sense of confidence in the economy and a belief that the market would continue to rise.

On September 5th, 1929, economic forecaster Roger Babson predicted a stock market crash. However, people ignored his warning because they believed the economy was doing well, as evidenced by high share prices.

On October 19th, investors started selling shares in large quantities. The market declined over the weekend, but there were still buyers and sellers on Monday. By Wednesday, the 23rd, heavy selling began, causing share prices to plummet. This loss triggered a cascade of events that culminated in the infamous crash on October 29th.

On October 24th, 1929, the New York Stock Exchange witnessed a sharp decline in share prices, with over 12.5 million shares traded. This massive volume triggered investor fear and widespread selling, further accelerating the market downturn.

October 29th, 1929, saw an unprecedented 16 million shares traded, far exceeding the buying power. This imbalance caused share values to plummet drastically, leading to countless speculators losing all their money.

President Hoover, a strong believer in laissez-faire economics and individual responsibility, adopted a limited response to the Wall Street Crash. He focused on state government and charity intervention for providing basic needs, but avoided direct federal intervention.

Banks played a significant role in the Wall Street Crash. They readily provided loans to speculators and investors, even buying shares themselves, contributing to an inflated market. When the crash hit, many banks collapsed due to unpaid loans, further exacerbating the situation.

President Hoover's public statement on October 26th, 1929, aimed to restore confidence in the economy. This, combined with the Big 6 banks' intervention, momentarily calmed the markets. However, the underlying instability in the market and the economy proved too strong to overcome.

The sharp decline in share prices during the crash caused widespread economic devastation. Businesses struggled to maintain production, leading to rising unemployment. People lost their savings and homes, and the overall economy entered a severe recession.

The suddenness and severity of the Wall Street Crash surprised many people, as they had grown accustomed to the booming economy and rising share prices. They had overlooked warning signs and ignored the vulnerability of the market fueled by speculation and overconfidence.