| -In the 1920’s, many people were investing.-As more and more people put money in the stock market, prices of shares kept rising.-On Tuesday, October 29, 1929, a day still remembered as Black Tuesday, stock prices plunged.-Stocks lost their value because many people wanted to sell their shares but every few people wanted to buy.-The stock market crash was a key cause of the Great Depression, but it was not the only cause.
| 30.2 A Shaky Stock Market Triggers a Banking CrisisA Speculative Boom Leads to a Spectacular CrashA Banking Crisis Wipes Out People’s Savings
| -The purpose of a stock market is to provide businesses with the capital they need to grow. Business owners sell portions, or shares, of their companies to investors. By buying shares, investors supply money for businesses to expand.-The promise of financial gain drew new investors to the stock market. The result was a bull market or a steady rise in stock prices over a long period of time.-In the late 1920s, a lot of people were swept in the wave of speculative enthusiasm for the stock market.-These investors believed that if prices were high today, they would go even higher tomorrow.-Investor optimism was so intense that not only did people put their savings in the stock market, but a growing number actually borrowed money to invest in stocks.-Borrowing money was easy to do in the 1920s. A buyer might pay as little as 10 percent of a stock’s price and borrow the other 90 percent from a broker, a person who sells stocks.-The result was that someone with just $1,000 could borrow $9,000 and buy $10,000 worth of shares. This is called buying on margin.-As prices dropped, creditors who had loaned money for buying stock on margin demanded that those loans be repaid.Many had to sell their homes, cars, and furniture to pay their debts.-Stock market prices peaked on September 3, 1929. After that, prices began dropping, sometimes in small increments, sometimes in tumbles like the huge drop...
Please join StudyMode to read the full document