From Boom to Bust
America participated in World War I in its final two years; between late 1917 until the end of the war. During this time, the United States experienced a huge economic boom. "Farmers supplied extra food to European allies, and factories created war materials used in the fighting." (Fitzgerald 14) The extra production of weapons and other goods for the Great War created jobs and helped the American economy stay strong. World War I did not have a such positive effect on other countries worldwide. In the 1920's, United States seemed to be the richest country in the entire world. Americans thought that spending their money was the best way to become rich and keep the economy strong. Luxuries, such cars and fancy clothes, were bought by everyone, from the wealthiest to middle-class. But people couldn't really afford what they were buying. They would buy luxuries using installment plans. This would allow a consumer to purchase something with only a small portion of the total cost as a down payment, and pay the rest month by month until the purchase was completely paid off. People could afford anything they wanted, and didn't worry about how they would pay for their purchases each month. Americans believed they could get rich fast by buying stocks on investment plans, as well. They would pay about 10% of the total cost, and their broker would pay the rest. Stock prices were rising very fast at the time, so people invested in stocks using investment plans. At the time, because stock prices were rising, people did not think that the prices would ever go down. They did not consider that if prices did go down, they would have to pay the 90% that they didn't pay back to their broker. It seemed as if the economic boom would never end, yet there were signs that the good times wouldn't last for long.
Although the Great War helped the American economy stay strong, it still cost billions of dollars and over 120,000 American lives. The war made people adopt an isolationist attitude regarding trade and politics. Workers thought that by buying foreign products, they would lose their jobs. In result, the government placed a tariff on imported products, which caused foreign countries to respond by creating similar tariffs in their own countries. Exports from the United States were cut in half, and more Americans lost their jobs.
The Stock Market had continued to see steady growth, until Monday, October 21, 1929. That day, it began slipping in the other direction, and brokers advised their clients to sell their stocks. There was a huge increase in the amount of sales; people began to worry. Others heard over the radio and in newspapers about the increased selling of shares, and began to sell theirs too. Two days later, over four billion dollars was lost in the busiest trading day ever. On October 24, 1929, stock prices took a huge dip, and brokers had to take loans from banks to cover their customers' loans to them. When banks began to require loans to be paid back, brokers had to demand from their clients that they pay their own loans back. If they couldn't pay, the broker had to sell the shares the client had, often for a loss. The broker then used that money to pay back their own debt. On Tuesday, October 29, 1929, stock prices rushed downward and didn't stop. More than 16 million shares were traded, and many people discovered that they lost everything they had, and were even in debt to their broker. "Within weeks, millions of Americans lost a total of $30 billion - the equivalent of about $340 billion in today's dollars." (Fitzgerald 21)
The stock market crash affected the entire nation. Investors came into debt with their brokers, and brokers had to take out bank loans, which many could not pay off. Since brokers couldn't pay off loans, banks were forced to close. With banks closing daily, people everywhere began to panic and took their money out of their bank. These banks were forced to close, and those who did not get their money out most likely never saw it again. If banks were struggling, they had to demand for homeowners and farmers to pay back their mortgages. If the customer couldn't pay it, the bank could take the person's property and sell it, or they could foreclose the loan. Many smaller businesses that had invested in banks that had closed were forced to close as well, meaning people lost their jobs. Even if the businesses stayed open, not many people had the money to buy, so businesses were forced to lay off workers. It was a domino effect throughout the country.
The signs of the Depression were everywhere. At the height of the Depression, unemployment reached 25% (about 33% in today's standards), which was equivalent to approximately 16 million unemployed Americans. People saw their jobs, their homes, and their life savings disappear. Some had to send their children away to relatives who could better care for them. Families had to turn to bread lines and soup kitchens to get the food they needed. Individuals had mental breakdowns or committed suicide. People took any job they could get; one of the popular ones was selling apples. In 1930, over 6,000 people were selling apples on New York City streets. The people needed the government to help, yet President Hoover refused to give much of it. He believed that people should help themselves, without government interference. He gave only businesses financial aid, for he thought that helping the businesses would help the economy and lead to jobs. But the lack of government aid all changed once President Franklin Delano Roosevelt came into office. He promised a "new deal" for Americans, and he followed through. His programs helped millions suffering from the effects of the Depression, yet it was not the New Deal that ended the Great Depression.
As the Allies were fighting in World War II, President Roosevelt offered support by providing weapons to them. Companies began to make machine guns, tanks, planes, and warships. More jobs were created to help with these demands, and the unemployment from the Great Depression began to decrease. Jobs were also created to help train soldiers in Army bases. On December 7, 1941, Japan attacked Pearl Harbor in Hawaii. The United States officially entered World War II, which allowed for more job growth. The United States' entry to the War was what America needed to finally end the Great Depression.
Although the Great War helped the American economy stay strong, it still cost billions of dollars and over 120,000 American lives. The war made people adopt an isolationist attitude regarding trade and politics. Workers thought that by buying foreign products, they would lose their jobs. In result, the government placed a tariff on imported products, which caused foreign countries to respond by creating similar tariffs in their own countries. Exports from the United States were cut in half, and more Americans lost their jobs.
The Stock Market had continued to see steady growth, until Monday, October 21, 1929. That day, it began slipping in the other direction, and brokers advised their clients to sell their stocks. There was a huge increase in the amount of sales; people began to worry. Others heard over the radio and in newspapers about the increased selling of shares, and began to sell theirs too. Two days later, over four billion dollars was lost in the busiest trading day ever. On October 24, 1929, stock prices took a huge dip, and brokers had to take loans from banks to cover their customers' loans to them. When banks began to require loans to be paid back, brokers had to demand from their clients that they pay their own loans back. If they couldn't pay, the broker had to sell the shares the client had, often for a loss. The broker then used that money to pay back their own debt. On Tuesday, October 29, 1929, stock prices rushed downward and didn't stop. More than 16 million shares were traded, and many people discovered that they lost everything they had, and were even in debt to their broker. "Within weeks, millions of Americans lost a total of $30 billion - the equivalent of about $340 billion in today's dollars." (Fitzgerald 21)
The stock market crash affected the entire nation. Investors came into debt with their brokers, and brokers had to take out bank loans, which many could not pay off. Since brokers couldn't pay off loans, banks were forced to close. With banks closing daily, people everywhere began to panic and took their money out of their bank. These banks were forced to close, and those who did not get their money out most likely never saw it again. If banks were struggling, they had to demand for homeowners and farmers to pay back their mortgages. If the customer couldn't pay it, the bank could take the person's property and sell it, or they could foreclose the loan. Many smaller businesses that had invested in banks that had closed were forced to close as well, meaning people lost their jobs. Even if the businesses stayed open, not many people had the money to buy, so businesses were forced to lay off workers. It was a domino effect throughout the country.
The signs of the Depression were everywhere. At the height of the Depression, unemployment reached 25% (about 33% in today's standards), which was equivalent to approximately 16 million unemployed Americans. People saw their jobs, their homes, and their life savings disappear. Some had to send their children away to relatives who could better care for them. Families had to turn to bread lines and soup kitchens to get the food they needed. Individuals had mental breakdowns or committed suicide. People took any job they could get; one of the popular ones was selling apples. In 1930, over 6,000 people were selling apples on New York City streets. The people needed the government to help, yet President Hoover refused to give much of it. He believed that people should help themselves, without government interference. He gave only businesses financial aid, for he thought that helping the businesses would help the economy and lead to jobs. But the lack of government aid all changed once President Franklin Delano Roosevelt came into office. He promised a "new deal" for Americans, and he followed through. His programs helped millions suffering from the effects of the Depression, yet it was not the New Deal that ended the Great Depression.
As the Allies were fighting in World War II, President Roosevelt offered support by providing weapons to them. Companies began to make machine guns, tanks, planes, and warships. More jobs were created to help with these demands, and the unemployment from the Great Depression began to decrease. Jobs were also created to help train soldiers in Army bases. On December 7, 1941, Japan attacked Pearl Harbor in Hawaii. The United States officially entered World War II, which allowed for more job growth. The United States' entry to the War was what America needed to finally end the Great Depression.