From 1925 to 1929, the Stock Market was experiencing a boom. Americans began to buy stock "on margin." This meant that they borrowed thousands of dollars from their brokers to buy stock. This was considered a huge financial risk, but they didn't care! They believed the stock market would only rise and therefore they would always make money.

On October 24, stock prices began to fall, millions of shares were sold and the stock market dropped four billion dollars. Many stores were forced to close and people who spent all of their savings on the stock market were now broke. On October 29, Black Tuesday, the stock market crashed.

On that day, 16 million shares of stock were sold and the stock market fell over $14 billion. On Black Tuesday, the United States lost more money than they had spent on all of World War I. The stock market wouldn't recover for another 22 years! Black Tuesday represents the day that the Roaring '20s ended and the Great Depression began.

By the early 1930s, the stock market wasn't the only thing in trouble. Businesses were closing, jobs were scarce and banks were shutting down. This was the beginning of the Great Depression. In 1930, 26,000 American businesses collapsed. By 1932, 3,500 banks had closed and 12 million people didn't have a job.

One cause of the Great Depression was that wages had not kept up with growth of industry in the 1920s. Because owners of industries were keeping most of the profits, fewer people were able to afford products. The buy-now-and-pay-later way of doing things had disguised the problem until people had to pay their bills. People began to run out of money and therefore did not buy as many products. Therefore, companies decreased production and began to lay off workers and people had even less money to spend.

During the Great Depression, some unemployed lumberjacks set fires so they could earn a few dollars as firefighters, putting out the same fires that they had started! Farmers who couldn't get a fair price on crops let fruits and vegetables rot in their fields, even though there were millions of people starving across the country. Lines for free meals at soup kitchens stretched out for blocks, and people fought over garbage cans behind restaurants just to get a scrap of food.

People needed a leader to help them survive the Great Depression, and a leader they got! Franklin Delano Roosevelt became the 32nd president of the United States in 1933. He worked to save the United States and end the Great Depression. In his first 100 days in office, the government passed new laws to help farmers, set up a federal relief program, establish a minimum wage, regulate the stock market, insure bank accounts and employ millions of people...

-kt98
 

Sources:

http://mutualfunds.about.com/cs/1929marketcrash/a/black_tuesday.htm

http://www.pbs.org/wnet/newyork/laic/episode5/topic6/e5_topic6.html

Brewster, Todd, Jennings, Peter; The Century for Young People. Page 65-71.