A day known as Black Tuesday. The biggest crash and subsequent economic depression of the 20th Century began on October the 29th 1929.. Share values across the world dropped hugely and people began selling their shares in a desperate bid to avoid losing the money they had invested. This only served to force share prices even lower. Banks had been investing the savings of their account holders in the stock market.
When the crash hit, millions of ordinary people found their savings were now worthless as the banks no longer had the money. As a reaction to this, a series of bank runs took place. Members of the public tried to withdraw their money from their accounts before there was none left. America was affected greatly by the crisis. Within the first two months after the crash, stockholders had lost more than fourty billion dollars.
744 US banks failed in the first ten months of 1930.. A total of nine thousand banks failed during the entire decade. Consumer spending reduced dramatically and prices fell accordingly. Businesses went bankrupt. Unemployment soared.
Unemployment in America rose to 25%% during the Depression and of course, all the people who were out of work were unable to spend much money, causing the depression to get even worse. U S President Franklin D. Roosevelt initiated a policy which came to be known as, The New Deal, in an attempt to restart the economy through a sequence of programs including the creation of four million construction jobs in poor rural areas and smaller communities. Eventually the Depression ended as countries began preparing for the Second World War and millions of jobs were created in the munitions industries and national militaries. What can we learn from this?
Firstly, excessive debt causes huge problems, both for the individual and for society. Secondly, banks need to be responsible and take good care of the money they have been entrusted with. And last, although it seems counter intuitive, the best thing we can do to get the economy going again is spend, and invest!