20's+and+30's+Review+Assignment

1930’s Depression Review Assignment
Thursday, October 24, 1929 has the dubious honor of being called Black Thursday because it was on this day that the New York Stock Exchange crashed, heralding the end of the "Roaring Twenties" and the beginning of the Great Depression. In the 1920's, things were really rocking in the Canada and around the world. The rapid increase in industrialization was fueling growth in the economy, and technology improvements had the leading economists believing that the uprise would continue. During this boom period, wages increased along with consumer spending, and stock prices began to rise as well. Millions of dollars were invested in the stock market as people began speculating on the rising stock prices and buying on margin.

The enormous amount of unsecured consumer debt created by this speculation left the stock market essentially off-balance. Many investors, caught up in the race to make a killing, invested their life savings, mortgaged their homes, and cashed in safer investments such as treasury bonds and bank accounts. As the prices continued to rise, some economic analysts began to warn of an impending correction, but they were largely ignored by the leading pundits. Many banks, eager to increase their profits, began speculating dangerously with their investments as well. Finally, in October 1929, the buying craze began to dwindle, and was followed by an even wilder selling craze. On Thursday, October 24, 1929, the bottom began to fall out. Prices dropped precipitously as more and more investors tried to sell their holdings. By the end of the day, the New York Stock Exchange had lost four billion dollars, and it took exchange clerks until five o'clock AM the next day to clear all the transactions. By the following Monday, the realization of what had happened began to sink in, and a full-blown panic ensued. Thousands of investors -- many of them ordinary working people, not serious "players" -- were financially ruined. By the end of the year, stock values had dropped by fifteen billion dollars.

Many of the banks which had speculated heavily with their deposits were wiped out by the falling prices, and these bank failures sparked a "run" on the banking system. Each failed bank, factory, business, and investor contributed to the downward spiral that would drag the world into the Great Depression.

Questions
1. Why were Canadians so confident in the stock market in the years leading up to the Great Depression? 2. How did the “Psychology of Consumption” shape the causes and effects of the Crash?  3. How did stock market investing change during the 1920s? Who were the main investors and how did they pay for their investments?  4. Explain the statement: "By 1929, much of the money that was invested in the stock market did not actually exist. 5. Why did Mackenzie King choose the term "depression" for this economic downturn? Why do you think this term has remained part of the Canadian vocabulary ever since?