The Great Depression
...ression. World War II helped end the depression as supplies for the war now needed to be built. The production of these supplies helped get some jobs back and circulate some money into the economy again. At the depth of the depression, the economy came to a virtual stand still. Workers couldn't find employment because employers wouldn't hire them to work; firms wouldn't hire workers because there were no markets for produced goods; and there was no market for goods because workers were unemployed and had no money to spend. Seventy five percent of the US population spent their entire yearly incomes on food, shelter and some clothing. “The stock market crashed on Black Tuesday, October 29, 1929. American common stocks lost almost 13% of their value that day, which was relatively small when compared to a one-day drop of around 22.5% in 1987. However by the completion of the collapse of the Dow Jones Industrial Average it had fallen from 381 to 257, losing one third of its value before investors rushed back in and started buying again at, what they thought were, bargain basement prices. The buying drove the index up to almost 300 before it started falling again. The Dow reached its final low in 1932 after losing almost 90% of its original value to around 40 on the DJIA. In relative terms in today's market, this would mean a NASDAQ of around 500. After reaching its ultimate low in 1932 the DJIA did not regain its original level of 381 again until 1954.” *Gusmorino, Paul A., III. "Main Causes of the Great Depression." Gusmorino World (May 13, 1996). www.gusmorino.com/pag3/great_depression/index.html Americans invested in the stock market heavily in the 1920’s because there was rising stock dividends. There were many new investors entering the market, many who viewed it as an easy way to get rich quick, which helped inflate stock prices. People also now had an increase in personal savings, giving them extra money to spend or invest. At this time, banks made money more readily available at lower interest rates to more and more people. People reportedly were taking loans out of a bank to invest into stocks. From 1925 on, industry was over-producing. Firms were making more money than they had ever have made, and had a huge surplus. They started buying all new machinery, hiring new employees, which in turn produced even more product. All this ...