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The economic prosperity of the 'Roaring Twenties' came to an end in October 1929.

On Black Tuesday, 29 October 1929, 16 million shares were sold on the stock market in Wall Street and the economy collapsed completely.

By 1930, America was in the Great Depression.

As farming techniques improved, farmers started producing more food.

However, the demand for grain fell in America because of Prohibition and changes in tastes in food (less demand for wheat-based products).

There was also less demand from Europeans for American goods because they had placed tariffs on them and overproduction led to falling prices.

Thousands of farmers also had heavy debts as they had been encouraged to invest in new machinery and technology.

In 1924, 600,000 farmers lost their farms.

• By the end of the 1920s, there were too many consumer goods unsold in the USA.
• Mass production methods led to supply outstripping demand.
• People who could afford items such as cars had already purchased them.
• People in agriculture and the traditional industries, who were on low wages, could not afford consumer goods.
• Factories were losing money and forced to let go of workers, causing unemployment.
• This just repeated the cycle of a lack of demand.

• Coal mining, shipbuilding and railroads were either stagnant or in decline.
• Mechanisation also caused unemployment in these sectors.

• America tried to sell its surplus goods in Europe.
• However, the Fordney-McCumber Tariff Act 1922 had led to European countries imposing tariffs on American goods.
• This meant American goods were too expensive to buy in Europe, and as a result, businesses could not export their surplus goods.
• There was, therefore, a decrease in trade between America and Europe.

• The laissez-faire policy of the Republican Presidents (Harding, Coolidge and Hoover) meant there were not enough safeguards in the economy, especially on the banks and the stock market.
• Banks were not regulated and often loaned money recklessly, and they were not guaranteed to get it back.
• There were very few large banks in America, but there was a huge number of small ones which were unstable and did not have the financial resources to cope with the rush for money (as people tried to draw out their cash) when the Wall Street Crash happened.
• Many banks had already closed even before the crash, leaving thousands of customers with no money at all.

• A lot of Americans bought goods on hire purchase.
• As a result, they owed money to shops and credit companies.
• Many of these businesses got into financial difficulties when people failed to pay their debts.
• House prices increased a great deal in the early 1920s.
• However, after 1926, house prices fell, leaving some Americans owning houses that were worth less money than what they had paid for them.

The government’s selling of war bonds during World War One meant ordinary people became attracted to investments.

Their interest continued in the 1920s, especially when they saw wealthy people making huge profits from buying and selling shares.

Shares are based on the value of a company. If the price of a share goes up, shareholders make a profit; if it goes down shareholders make a loss.

Attracted to the possibility of getting rich, shareholders often ignored the risk that they would make a loss.

Many Americans who could ill-afford to lose money became caught up in this disastrous type of speculation.

Some people even bought shares “on the margin”, i.e. they borrowed money to buy shares and then held on to them until they were worth more than the debt.

Between 1927 and 1929, there was a buying frenzy.

Almost 20 million Americans owned shares, pushing the value of shares up to unrealistic prices.

When the stock market crashed they were ruined.

People also made vast profits speculating on land, especially in Florida, and the price of land soared.

However, land values collapsed in 1926 and so did investors’ finances.

The economy was very unstable before 1929, but it was events in that year which finally brought the 'Roaring Twenties' to an end.

• When Herbert Hoover became President in 1929, people thought he would increase
  tariffs because he had promised to do this in the election campaign.
• This boosted trading in shares on the stock market, which pushed prices up further.
• When the Senate blocked Hoover’s plans on tariffs, people began selling their shares.
• This meant prices started to drop sharply.

• Experienced investors knew the American economy was slowing down.
• If companies were struggling then their share price should not be so high.
• This meant that shares were overvalued.
• In September 1929, investors' lack of confidence in the price of shares meant they began selling them in large numbers.
• This caused prices to drop further.

By October, many more people started feeling nervous and panicked. They rushed to sell their shares.

On 24 October 1929, Black Thursday, 12.8 million shares were sold. Prices plummeted and the stock market began to crumble.

On 29 October 1929, Black Tuesday, the collapse of the economy was complete. 16 million shares were sold at a fraction of their price.

Thousands of people saw their fortune invested in shares, or any money they had in the bank, disappear.

Those who had bought “on the margin” were in great trouble.

The stock market in New York had now collapsed.

The 'Roaring Twenties' came to a sudden end.

The unstable economy during the 1920s and the Wall Street Crash in 1929 led to an unprecedented economic depression in the USA.

• Many of the businesses that had driven the economic boom went bankrupt.
• Between 1929 and 1932, 109,371 businesses failed and America’s GNP dropped by almost 50 per cent.
• Car production fell by 80 per cent and building construction by 92 per cent.

• The public lost confidence in the economy and hope in the future.
• They blamed big businesses and banks for the problems.
• Deaths by suicide went up 50 per cent.
• The stock market confidence was also low as people were now afraid to invest in it.

• 659 banks closed in 1929.
• This increased to 2,294 in 1931.
• They collapsed because people withdrew their savings for fear of losing money.
• Their closures, in turn, led to the remainder of savers losing their cash as well.
• The biggest bank to close was the New York based Bank of the United States with 400,000 depositors losing their money.
• Those banks which remained refused loans to struggling firms, leading to even more bankruptcies.

• Many people had bought shares “on the margin” hoping to pay off the debt through making a profit.
• The Wall Street Crash meant that they had lost their investment, but now also owed a debt.
• A lot of the consumer boom was based on hire purchase agreements.
• These debts also had to be paid off.

• People could no longer buy consumer goods, such as cars and clothes.
• As a result, workers were made redundant.
• Unemployment rose to 25 per cent of the national workforce (14 million people).
• In some regions it was much higher.
• In Denora in Pennsylvania in March 1932, only 277 people out of nearly 14,000 had jobs.
• There was no work at all in the coal mines of Illinois.
• Unemployment and distress were highest among immigrants and black Americans.

• A lack of income meant that people were struggling to pay their mortgages.
• In 1932 alone, over a quarter of a million people lost their homes.
• Shanty towns sprang up in the cities due to the amount of homelessness.
• They were called "Hoovervilles", after President Herbert Hoover.
• There were over one and a half million vagrants, called hobos, who lived rough and travelled across America, looking for any type of work.

• Even those with jobs faced difficulties.
  • Women, immigrants and black Americans had no choice but to work for longer hours for reduced pay.
• Wages dropped to starvation level.
• The average hourly wage in factories fell from 59 cents in 1926 to 44 cents in 1933.

• The plight of farmers, which was already distressing in the 1920s, deepened.
• A renewal of the USA’s tariff war with other countries, because of the Hawley-Smoot Act, decreased their sales even further and evictions for non-payment of mortgage increased.
• Prices were so low that farmers left the crops to rot in the fields and farm animals were killed instead of being taken to market.