Why Did The Stock Market Decline

1826 Words4 Pages

In a span of just fours days in October 1929, 30 billion U.S dollars were lost in the Stock Market, which is equivalent to 396 billion U.S dollars today. The Stock Market is a place where people can trade stocks which is either buying or selling a share of a company. The stock of a company is sold in units called shares and anybody can invest into any publicly owned company. The more shares an investor buys, the more of the company they own. In order for investors to have a sense of how the market is doing, there are indexes which are a basket of stocks that show and give investors a general idea of how the market is doing at that time. In late October 1929, the Stock Market had a sudden decline that forced many people to sell all of their …show more content…

After the stock market crashed, very few people invested in stocks since there was very little money to be made, and stocks were on average only 20% of their 1929 peak value. Since far less people were investing, more people became worried about paying back their loans to the bank and withdrew large amounts of money or even their entire life savings in order to pay back their loans (" The Stock Market” 3). This lead to an exponential decline for banks and other financial institutions. By 1933, 11,000 of 25,000 United States banks had failed, and since the Federal Government had not yet created deposit insurance many people lost their entire life savings (" Franklin D. Roosevelt Creates” 1). Since all economic classes were growing substantially poorer there was little to no money to be spent on luxuries causing consumer demand to plummet and many business started to fail (" The Stock Market Crashes” 4). Not only did business fail because of less consumer demand they also failed because less people were investing, meaning less money was being given to the companies. As many businesses failed, many people became unemployed. These people who were jobless took long trips, hitchhiking or sneaking onto trains hoping different towns or cities would be able to provide them with a job (" Family and Home” 2 ). Unfortunately for these people in search of a job, the majority of the time they were unable to find one. Since these families had no source of income, they were forced to spend their life savings in order to survive. This created a large cycle of poverty all throughout the United States (" Franklin D. Roosevelt Creates” 2 ). The increased number of people living in poverty decreased the quality of life. Families that lived with many luxuries in the “Roaring 20’s” were forced to change their lifestyles and had to learn to

Open Document