The Great Depression
In America the 1920's were a decade of prosperity some every claimed that we had entered into the age of permanent prosperity. Much of the world was still struggling to get over the affects of World War I but the United States was thriving. The U.S. sentiment can be depicted from the lyrics of the song “…Blue skies, nothing but blue skies from now on…” that was composed in 1926 by Irving Berlin. However this sentiment would not last and American was soon to find that there is no such thing as permanent prosperity. Change was coming both in economics and climate and in turn policy; these changes were to bring the roaring twenties to a dead stop. October 29, 1929 became known as Black Tuesday; the day the stock market crashed which marked the beginning of the Great Depression. The average American had been introduced to consumer credit throughout the twenties. With this new line of credit everyone was interested in the “buy now and pay later” scheme and there were so many new innovative inventions available such as radios, refrigerators, washing machines and air conditioners that every American thought they were entitled to. This was the dawn of the consumer revolution. The stock market had also become the ideal easy money maker for the everyday man but in many cases the big winners in the market were the ones with the most skin in the game. The wealthiest had the ability to manipulate a stock to by pooling to inflate the price to make it appealing to the everyday investor and as the everyday investor was buying into the company the price manipulators were selling off their shares and enjoying the climb along the way. The manipulation was often done through increased share activity as well as false positive publicity. By the time the stock hit its peak the original pool manipulators had sold off their shares and all of the everyday shareholders that had been duped into their shares got to ride the stock back to its real market price. What made this worse in many cases for the everyday shareholders was that many were buying their stocks on margin which means they were essentially gambling with borrowed money and in many cases this amount was 10 times what they could afford. This was all in a time before there was any regulation from or existence of the SEC (U.S. Securities and Exchange Commission) so there were no securities laws to prevent fraudulent activities in the stock market. The American economy was becoming dependent on money that was in fact not really there, the excess in consumer credit use and stock purchases bought on margin were the root problem but at the same time they were the only thing holding this card house economy from collapsing. The U.S. economy was beginning to show signs of trouble; automotive sales were down, construction was slowing, and in turn steel production was down. Customers were becoming scarce because so many Americans were in great debt from their lines of credit. Yet in many cases consumer goods continued to flood the market despite the lowering numbers of customers. In 1928 Herbert Hoover won the presidential election in a landslide victory and would be in office from 1929 to 1933, he had no idea of the difficulties that lie ahead. When President Hoover spoke of poverty during his inauguration speech he said, “Given the chance to go forward with the policies of the last eight years, we shall soon with the help of God, be in sight of the day when poverty will be banished from this nation.” He went to say “We in America today are nearer to the final triumph over poverty than ever before in the history of any land.” He believed in the idea of permanent prosperity as much as any other American citizen. It was only several months after making such optimistic statements that America would fall into the Great Depression. When the bottom finally fell out of the stock market in 1929 there had been many signals of what was coming. The financial bubble that had been created...
Please join StudyMode to read the full document