Troubles of the 30s

 People who bought stocks on margin (on credit with 10% down) were now being asked to pay brokers the money they still owed.  On Tuesday, October 29, 1929 a stampede of stock selling hit the New York Stock Exchange causing what is known as Black Tuesday.  As people sold their stocks the prices plunged and there were no buyers for the stocks.

 Overproduction led business into trouble.  During the prosperity of the 1920s, factories and farmers produced large amounts of goods.  As wages stayed the same and prices of products rose, average Americans could not afford to purchase these new goods.  Since factories had too many goods and too few buyers, orders slowed and factories were now forced to lay off workers.

 Banks invested in the stock market  When the stock market crashed, the banks lost its depositors money.  In addition, borrowers could not repay their loans and without the money from the loans, the banks could not give depositors their money.  This forced more than 5,000 banks to close between 1929 and 1932 causing people to lose their savings.

 The stock market crash triggered one disaster after another.  For example, the stock market crash ruined many investors. Without money from investors, businesses could no longer grow and expand.  As the banks began to get in trouble, businesses could not ask for loans.  Without capital from the banks, businesses had to cut back on production causing lay offs, wage cuts and even factory closings.  With unemployment so high, the number of people buying goods dropped causing even more factories to close.  In the end, many businesses went bankrupt and many people were left without jobs.  In addition, high tariffs on American made goods strangled international trade.