The Wall Street Crash

On the 29th October 1929 the American Stock Exchange collapsed. The Golden Age of American expansion and investment had come to an end. President Hoover had reassured Americans that 'The Good times were just around the corner' and that the boom would continue. However the writing was really on the wall. Decline in trade, consumption, wages etc. should have made the government sit up and prepare for the drop in share prices. In September  of 1929 Roger Babson, an economic forecaster said that 'sooner or later a crash is coming and it may be terrific'.

Panic as Wall Street collapses and people desperately try to get their money back by selling worthless shares!

So why was a collapse so clearly coming?

Large companies cannot get all of the money they need to invest without outside help. Investors are sought to put money into the company and they get a return called a dividend. So in theory you put money in and a profit is made. However, if the company doesn't make the returns it hoped for investors get edgy and want to get out. This causes further problems and the share price falls further. it can create a self-fulfilling prophecy. 

Some times the share price can drop because the market for a product comes to an end. Economists call this 'saturation point'. In 1929 both of these happened and investors scrambled to get their money back. People who had saved all of their money and put it into banks found that these institutions had invested in the companies that had gone bankrupt. The USA was entering a disaster.

Ordinary people had found banks were not the safe place to leave their money.

 It would take the remarkable policies and leadership of Franklin D Roosevelt to solve it.

Conditions for ordinary people after the crash were horrendous. The line of people queuing for food shows the extent of the problem.