Stock Market of 1920s

The stock market in the nineteen twenties was a whole rollercoaster because of its rapid increase and decrease. Some newspapers would even jokingly call it, “Stock Market. The Ride.” It had a big impact on the American economy and it also represented a major increase then loss in America.

According to Nick Hardcastle, following World War I, there was a major economic boom in the United States, specifically in the 1920s. A boom is a time of financial prosperity, stock increase, and rapid progress.

Half of it was based on credit while the other was based on buying of more and more goods. As the industry boomed, so did the company’s shares on the stock market! The only problem was that wages of workers did not increase. They actually started decreasing. Money found its way into less and fewer people, but prices of shares kept increasing. People were so sure that the boom would last forever, but little did they know, this was the calm before the storm.

The general public was pressured by advertising to buy more and more (Hardcastle). This was a key component to the Great Depression. People started using credit to buy things since they could not afford it on their own (Hardcastle). A lot of companies used catchy slogans to get people to buy stuff like Hennery Ford says, “Every American Home Should Have One.” As Nick Hardcastle also states, “then Hennery Ford changes it to ‘Every American Home Should Have Two’.” This was a sign of major desperation.

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People cannot go on buying forever with no consequences and debt had to be repaid. Advertising was crucial and very pressuring.

Consumerism increased as a result of mass production (Sullivan). As stated by Nate Sullivan, consumerism is the promotion in customers interest in a product, it can also be thought of as the culture that surrounds the buying and selling of products. With more free time available, Americans were eager to own the latest and most trendy items. Many advertisers used this to their advantage. Installment buying, also known as buying on credit became extremely popular as well (Sullivan). This allowed families to buy expensive items such as automobiles and pay them off over a period of time.

As stocks increased, so did the people that wanted to invest in them. Fun fact: 2 of every 5 dollars that the bank loaned out was invested in the stock market (Shorts)! As a result, to say buying stocks in the 1920s was crazy is an understatement. Some people even bought stocks on street corners (Hardcastle). Sometimes people were buying stocks for companies that didn’t even exist or was something completely different like buying stock for an airline company and then finding out that it was actually a railroad company (Hardcastle). Some companies were fake and wanted to lure investors into buying them and then taking their money. How crazy is that? This also credited to the falling stock market.

The booming stock market added millions of investors. A lot of people wanted to try their hand at the stock market and hopefully make a fortune due to the booming market. Many investors bought stock on margin when they couldn’t afford the full price. This means paying only 10% of the value and hoping to make enough money to pay the full price later (Hardcastle). Many stockbrokers even encouraged buying stocks on margin. A lot of people put their life’s saving into the stock market and sometimes even things like their inheritance and even college money. This led to major devastation during the Great Depression.

There was also a long bull market in the 1920s. As said by Linda Alchin, “A bull market is a long period of rising stocks.” This was fueled by the economic boom (Alchin). This also led to consumerism in America (Hardcastle). There was easy credit but there was also increased debt which wasn’t good for America’s economy (Alchin). Stocks kept growing and increasing and investors kept getting more confident and putting more money in.

After the long bull market, there was a four day drop of falling stock prices as listed by “Stock Market Crash of 1929”. On October 29th, 1929, the United States suffered the biggest drop in stock market history. Then a few more days of dropping stocks followed. Billions of dollars were lost and then there came a downward spiral which would eventually lead to the Great Depression (Shorts). One of the main causes was credit and not being able to pay that back (Amadeo). Also, there was no way that the boom would last forever. Investors frantically tried to buy stocks to undo the crash, but it made it worse and they lost even more money (Amadeo).

This led up to the Great Depression. Stocks were lowest they have ever been, but the only good thing was that there was nowhere to go except up. This was all kinds of devastation upon investors. As Herbert Hoover quotes, “We are now speeding down the road of wasteful spending and debt, and unless we can escape, we will be smashed in inflation.” Everyone in the United States was affected (Shorts). Half of America’s banks were closed (Amadeo). People lost a lot of money and it was extremely hard to find jobs since a lot of companies have gone bankrupt. Although the stock market was not the main cause of the Great Depression, it did act to accelerate the global economic collapse as said by the article, “Stock Market Crash of 1929.” As you can see, truly the stock market of the nineteen-twenties was a rollercoaster, but I can’t say that I did not enjoy the ride.