Economy of the 1920s The Calm before the Storm Mr. Mizak Modern American History

The Economy Appeared Healthy 1925 the market value of all stocks was $27 billion For the next few years stocks soared – 1928 stock values rose by >11 billion This led to high confidence in the economy Belief that “everybody ought to be rich” – Welfare capitalism – Similarity to today?

Signs of Danger Despite the prosperity on Wall Street, it was the rich who got richer Small % of the nation held the majority of the wealth.1% of the population held 34% of the nation’s wealth Many Americans got used to buying on credit – Is this still common today?

Playing the Stock Market Before the 1920s only the rich played the stock market. – Due to the prosperity of the 1920s, many middle- low class individuals started to invest Terms to know (define them in your notes) – Speculation – Buying on margin

Lets Take a Look at the Stock Market

Stocks Corporations are formed by selling shares of stock. By selling stock a company obtains funds for use in expanding business and (hopefully) making a larger profit Shares entitle the buyer to a certain part of the future profits of the company

Stock Returns On stocks money is made in two ways 1) Dividends- money given to a stockholder on the amount of money originally invested in the company 2) Individual sells the stock for more than they paid for it.

Bonds Bond- A certificate issued by a company or the government in exchange for borrowed money. Bonds pay a stated rate of interest over a stated period of time Buying bonds does not make a bondholder part owner of the company