During the 1920s, many people thought they were invincible. Although the farmers were still struggling, the economy was booming and the stock market did not seem risky. The average American believed they had the ability to become rich by investing their money in the market. As more Americans invested, the stock prices rose and the "strong bull market" made even more people want to invest.

Many Americans could not afford to buy stocks, so therefore they would buy on margin. Buying on margin meant they would borrow money from a broker. The buyer would only have to pay 10-20% of the cost of the stock, and the broker would contribute the rest of the money. If the stock fell below the loan amount, the broker would issue a "margin call" and the buyer must come up with the money to pay back the loan immediately. If the customer failed to pay the broker, the broker could not afford to pay the banker. Buying on margin was very risky, but Americans did not realize the risk because the rise in stock prices seemed never-ending. stock-market-crash-1929_4.jpg
On March 25, 1929 the stock market suffered a mini-crash. Americans all over the country began panicking and tons of margin calls were issued. Panic subsided when banker Charles Mitchell made the announcement that his bank would continue to give out loans. Although the stock market had seemed to have recovered, the mini-crash was only a prelude of what was to come the following October. During the spring of 1929, housing construction and car sales slowed and steel production slowed. However, the stock market surged and reached it's highest levels ever during the Summer. No one would have predicted what was to come.

On "Black Thursday", October 24, 1929, the stock prices tumbled. Brokers issued margin calls from their buyers, so investors sold stocks for whatever money they could get. The ticker fell behind an hour, so people had to wait to see how much money they had made or lost. During just the first 3 hours, stocks plummeted $11 billion. Midday, a group of bankers pooled money together to stop the plunging of prices. The market finally recovered it's morning losses, but that wasn't the end. The total amount of shares sold that day were 12.9 million. Stocks were steady on Friday, but dropped on Saturday. On Black Monday, many people sold and no one tried to save the market. Then, on Black Tuesday, the worst stock market crash in history occurred. The ticker lagged two and half hours behind, communications broke down, and switchboards were jammed. People were selling like mad, even rumors of bankers selling. Stock prices collapsed as panic struck the country. On October 29, 1929, 16.4 million shares were sold.

stock-market-crash-1929_7.jpgIn order for the market to begin to recover, it closed on November 1 for a few days. When it reopened on the fourth, prices dropped still. This economic slump continued until November 23, when prices finally became steady. The effects of the crash on the country were obvious. Many people had lost their entire savings and they no longer had any faith in the banks. Some Americans had never had any desire to invest their money in the stock market, but the crash still affected them because the banks had invested their money without their knowledge. Many people were living way below the poverty line now. Hourly wages dropped and people were laid off. The unemployment rates rose throughout the country. America was suffering.

This was the beginning of the Great Depression.