Banks spent $40million to stop decline Shares prices stopped falling Rumours that men had committed suicide Banks now demanded repayments of loans that Investors had to buy shares They now had to sell shares to pay the banks Everyone now selling shares with no one wanting them - Prices continued to drop Why did shares prices on Wall Street crash in October 1929?
In the 1920s an easy way of making money was to buy stocks and shares on the stock exchange because the price of shares were always increasing in value, so after holding onto them for a short while you could sell them at a good profit. The profits were so good people use to take out loans to buy the stocks and shares and would still make a profit even after paying back the loan. These easy profits and available credit helped fuel the economy and the boom of the 1920s. By September of 1929 $6 billion of debt had been amassed.
On 3rd September 1929 the stock market reached an all-time high the market dropped sharply only to rise and then drop again. Some people began to worry and started selling shares, in the weeks that followed prices continued to decline. Then on 24th October (Black Thursday) Prices fell dramatically as sellers tried to find people willing to buy their shares. Because prices were falling so much six of the richest bankers spent $40 million each buying shares to steady the markets. For awhile this worked but over the next few days rumours that shareholders had leapt from skyscrapers after losing fortunes and angry mobs out side the stock exchange made people lose confidence in the value of their shares. More and more people then rushed to sell their shares selling over 12 million shares.
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That evening, five of the country's bankers issued a statement saying that due to the heavy selling of shares, many were now under-priced. This statement failed to stop people wanting to sell their shares and on the 29th October, over 16 million shares were sold. The market had lost 47 per cent of its value in twenty-six days. The Wall Street Crash was to have a tremendous impact on the whole population, people who had borrowed money suddenly found they could not repay the money they owed so many banks went bankrupt.
The fall in share prices also made it difficult for companies to raise the money needed to keep their companies going. Within a short time, 100,000 American companies were forced to close and as a result many workers became unemployed. Demand for luxury goods fell companies had to lay workers off. The boom was over. Life in America was dramatically affected after the wall street crash. America had gone from a wealthy country with happy citizens to a place where only the rich could live.
Because no one had the money to buy anything like cars or houses that meant factors had to close down with nothing to manufacture, ports went to ruin as there were no boats to build, and business failed due to lack of customers and orders putting more people out of work. Every day the number of unemployed went up by 12,000. Overall 12 million people were out of work by the winter of 1932, which is a quarter of the country's work force.
There was no kind of Government Benefits or payment for people who were out of work so if you lost your job you had no money to buy food or pay bills. Over a million people became homeless because they could not pay their rent or mortgages and were thrown out many becoming "hobo" or "tramps" or having to live in makeshift houses made of cardboard boxes and scarp wood, these places became known as "Hoovervilles" named after President Hoover. A quote by Edmund Wilson, (new republicans) paints the picture of the American life in February 1933.
"There is not a garbage-dump in Chicago which is not diligently haunted by the hungry. Last summer the hot weather when the smell was sickening and the flies were thick, there were a hundred people a day coming to one of the dumps. A widow who used to do housework and laundry, but now had no work at all, fed herself and her fourteen-year-old son on garbage. Before she picked up the meat, she would always take off her glasses so that she couldn't see the maggots."
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