Many Americans began investing in the stock market even investing with their savings. Bankers wanted shares to such an extent that they bought (sometimes, unwisely with hind sight, with peoples money), paid and looked for more. The stock market came to a point whereby it became irresistible – it even seemed as though there was no risk of losing. Whilst all this swelling happened there was however a few ‘cool heads’ who knew that the stock market ‘bubble’ would eventually burst. By the late summer, however, warehouses became full of unsold goods, even though by 1929 the mass of people were better off than before- they were unable to buy their share of consumer goods and thus sustain the current level of mass production- which is key to prosperity. Factories, as a result, began to stop their output. Further resulting in businesses losing money. This meant businesses had to start to lay off workers in order to save money. By this time it had dawned on some that they ought to get out of the stock market and sell there shares.
On 23 October 1929 the stock market began to crash setting off a devastating economic collapse. Every body began to sell their shares as prices slumped. By the next day small investors, stock brokers and many others were ruined – some even tried to commit suicide. A lot of businesses closed down such as Anacoder copper and Radio. As a result of all this generations of savings had been wiped out, those who thought were making a good investment actually lost all their money which gradually resulted in people losing confidence in banks which would become an important fact, later in the new deal. Seeing as though wages still has to be paid and people were trying to keep their businesses afloat, loans had to be paid back, as were bills to be paid (for now no one would no longer afford to wait for a payment) there was a massive scramble for currency. In some case in order to pay to pay for things families would sell their personal possessions such as the car or house in order to raise money. It became difficult for firms to borrow money and therefore laid off workers resulting in unemployment.
Between 1929 -33, the four year period saw the gross national product fall by 30%, industrialization production halved. Farm production fell about 50%, unemployment rose- by 1932 approximately ¼ of Americans were unemployed. Because of the uncertain economic climate and the decline in confidence (of lending, borrowing and banks in general) American business men began to reduce stocks and production, thereby lying off workers as a consequence. During the years of 1929-32 American companies actually went bankrupt. This had repercussions not only within the American economy but also on foreign markets from which the Americans purchased. It also caused dramatic increase in unemployment as by 1932 approximately ¼ of Americans were out of work. However those who managed to stay in work were faced with massive reductions in hours and wages.
As mentioned before factories closed down, and business laid of workers, thus contributing to the already growing unemployment. The economic downturn hit a country poorly prepared to meet the demands of a mass unemployment. There had been no dole for the unemployed as in most European countries and for a long time the unemployed had relied on charity and neighborliness. Although, because of the extent of the depression this was no longer possible.
