America experienced an era of great peace and prosperity during the s.

Stock Market Crash of Facts, Causes, Effects

Air flight was becoming common as well. Investors soon purchased stocks on margin, which is the borrowing of stock for the purpose of gaining financial leverage. For every dollar invested, a margin user would borrow nine dollars worth of stock. Unfortunately, leverage also works the other way around and amplifies even minor losses. If a stock drops too much, a margin holder could lose all of their investment and possibly owe money to their broker as well.

From to , the Dow Jones rocketed from 60 to , creating many new millionaires. Investors mortgaged their homes and foolishly invested their life savings into hot stocks such as Ford and RCA.

The First Measured Century: Timeline: Events - Stock Market Crash

To the average investor, stocks were practically a sure thing. Few people actually studied the finances and underlying businesses of the companies that they invested in.

Thousands of fraudulent companies were formed to hoodwink unsavvy investors. How the Stock Market Crash of Happened.

In , the Federal Reserve raised interest rates several times in an attempt to cool the overheated economy and stock market. By October, a powerful bear market had commenced. On Thursday, October 24th , a spate of panic selling occurred as investors began to realize that the stock boom was actually an over-inflated speculative bubble.

Margin investors were being decimated as large numbers of stock investors tried to liquidate their shares to no avail. Millionaire margin investors went bankrupt almost instantly when the stock market crashed on October 28th and 29th.

During November of , the Dow sank from to Bank runs soon occurred when bank patrons tried to withdraw their savings from banks all at the same time. Major banks and brokerage firms became insolvent, adding more fuel to the stock market crash. The financial system was in shambles. Many bankrupt speculators, some who were once very affluent, committed suicide by jumping out of buildings. The stock market crash was beneficial for some speculators, however. Jesse Livermore correctly predicted the crash and shorted stocks to profit from the decline, earning him over million dollars.

Stock Market Crash Video - The Great Depression - nocuwahojopyx.web.fc2.com

Joseph Kennedy, President John F. Kennedy decided to sell his stocks because he overheard shoeshine boys and other novices speculating on stocks, leading him to believe that the stock market had been experiencing a speculative bubble. The stock market crash of led to a major economic crisis known as the Great Depression. Mass poverty became common and many workers lost their jobs and were forced to live in shanty towns.

Former millionaire businessmen were reduced to selling apples and pencils on street corners. One-third of Americans were living below the poverty line during the Great Depression. The Dow Jones finally surpassed its high, a full 26 years later in The Roaring Twenties and the stock market crash of was similar to any other speculative bubble and subsequent crash. The classic pattern of extreme euphoria and irrational expectations will always lead to devastating financial crashes.

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The Stock Market Crash of