The End of Prosperity

The End of Prosperity in the USA: 1910-1929

The Crashing Stock Market

  • The era of prosperity ended abruptly with the Wall Street Crash in October 1929.
  • The Wall Street Crash was the most devastating stock market crash in the history of the United States.
  • At its peak, margin buying led to a massive bubble in stock prices as people borrowed money to invest in stocks.
  • The crash began on Black Thursday (October 24, 1929) and ended on Black Tuesday (October 29, 1929).
  • On Black Tuesday, the stock market lost $14 billion in value, bringing the loss for that week to $30 billion.

Financial Fallout

  • The Wall Street Crash triggered the Great Depression, a severe worldwide economic depression.
  • The crash led to bank failures due to their investments in the stock market and their consumers’ inability to pay back loans.
  • The failure of the banks led to a loss of savings for many American citizens who kept their money in the banks.
  • Overproduction in industries and agriculture led to unsold goods, falling prices, and ultimately bankruptcies. This further deepened the economic depression.
  • Unemployment rose dramatically, as businesses could no longer afford to employ workers.

Global Impact

  • The USA had loaned massive amounts of money to European countries during WWI. The crash led to international financial crises as they were unable to pay back the loans.
  • The Smoot-Hawley Act of 1930 raised US tariffs on over 20,000 imported goods to record levels, leading to a decline in international trade.
  • Many countries fell into economic depressions of their own, further worsening the global economy.
  • The Great Depression saw an increase in extremist political movements worldwide, as people sought solutions to the economic hardship.

The Government’s Response

  • Initially, President Herbert Hoover believed in ‘rugged individualism’ and did not think it was the government’s role to interfere in the economy.
  • However, as the depression worsened, Hoover finally intervened with measures such as the creation of the Reconstruction Finance Corporation.
  • These measures were largely unsuccessful and Hoover was seen as incapable of dealing with the depression, leading to the election of Franklin D. Roosevelt who promised a ‘New Deal’.
  • Roosevelt’s ‘New Deal’ aimed at relief, recovery, and reform, and introduced unprecedented government intervention in the economy. This marked a significant shift in American politics and society.