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The stock market crash of 1929 was the worst economic crash in American history, carrying other countries to fall into economic downturns as well. According to history.com, the stock market crash began on Thursday, October 24, 1929 as stock investors traded a record 12.9 million shares. On October 28th, known as "Black Monday", the Dow Jones Industrial Average plunged 13% and then plunged another 12% the following day, on "Black Tuesday". While this economic crisis sent shockwaves throughout the country, there were signs that this crash was coming. The remainder of the this post will examine the causes of the inevitable stock market crash.
During the period of the Roaring Twenties, the economy and stock market expanded rapidly as the U.S. exited the Great War and entered into a period of manufacturing consumer goods rather than war goods and the introduction of buying on credit on a large scale, including the purchasing of stocks on margin.
From August 1921 through September 1929, the Dow Jones Industrial Average shot up, leading economists at the time to believe that the stock market had reached a permanently high plateau. The market officially reached its peak in September 1929 when the Dow Jones shot up to 381. By this point in history, even common working-class citizens became interested in the stock market and investing, and with the new purchasing power allotted to these workers in the booming economy, many were able to purchase stocks on margin, meaning they paid a small percentage of what the stock was worth and the bank or a broker lent the rest of the cost of the stock. Despite the purchasing of stocks on margin, which is undoubtedly one of the causes of the economic decline, the economy was in a boom cycle at the time--unemployment was down, purchasing power was up, and various industries were prosperous.
Although there is no one cause for the Great Depression, and economists and historians often debate about the primary cause, there are several theories as to the smaller bumps in the road which led to the Great Depression.
1. Overconfidence leading to a burst bubble--Just as the economy was on an uptick during much of the late 1990s through the mid-2000s, eventually leading to the crash of 2008, one of the causes of the Great Depression was overconfidence when it came to purchasing. Some economists and historians have argued that at the time of the crash, stock market prices were soaring to record highs (which can be both good and bad, as it would turn out), leading to a sense of overconfidence in how prosperous the U.S. economy was at the time as well as stocks being too expensive for many to purchase on their own without assistance from a broker or the bank. This led to an "asset bubble" which would burst.
2. Buying stocks "on margin"--With the economy on an uptick during the early 1920s, people who otherwise would not be able to purchase stocks and play the market were able to do so due to the ability to purchase stocks "on margin". This meant that rather than paying the full amount to purchase a stock, the buyer paid a percentage of the stock's cost while a bank or broker covered the remaining amount. This may have boost the stock market for a short time, but would have major repercussions in the wake of the stock market crash. When the crash occurred, millions of stock market shares became worthless and those who bought stocks "on margin" were saddled with debt they could not afford to repay.
Sunday, September 22, 2019
The 1920s seemed like a carefree period in American history; flappers, speakeasies, jazz music, and lavish parties seem to flood one's thoughts when this time period is mentioned. However, many constitutional and legal issues divided Americans in the 1920s. Many of these issues reflected the struggle between modern and traditional values and highlighted how international affairs could have an affect on domestic policies and attitudes. For some Americans, these issues took the form of racism, nativism, and intolerances of differences in religion and politics. This post will examine such issues as the resurgence of the Ku Klux Klan, the Red Scare, the Scopes trial, and restrictions on immigration.
The Red Scare, 1918-1919
The Red Scare was the imposition of stern measures to suppress dissent after World War I in a crusade aganst internal enemies. Fueled by the November 1917 Bolshevik Revolution, an uprising of Communists in Russia who overthrew the tsarist regime of the Romanov dynasty, the Red Scare targeted communists, socialists, anarchists, and others who were viewed as having un-American sentiments.
The Red Scare was led by Attorney General A. Mitchell Palmer and was sparked by several events which took place shortly after WWI. Race riots erupted in 25 cities; a series of labor strikes in Boston, Massachusetts climaxed with a walkout by police; several unexplained bombings added to the mass hysteria. All of these events, although unconnected, were seen as part of a Communist conspiracy.
The Attorney General ordered the first of the so-called Palmer Raids in late 1919. In 33 cities across the country, police without warrents raided the headquarters of Communists and other organizations. Eventually, they arrested more than 4,000 people, holding them without charges and denying them legal counsel. Some 560 aliens were deported. Palmer's harsh tactics would turn the public against him and his raids would come to an end. However, the Palmer Raids would have a lasting effect on the general public throughout the 1920s--many Americans would be discouraged from speaking their minds freely in open debate, thus hindering their constitutinal right to freedom of speech.
Sacco and Vanzetti
Closely linked to the Red Scare was the case of Nicola Sacco and Bartolomeo Vanzetti. These two Italian immigrants--and admitted anarchists--were convicted of murder in 1921 in connection with a Massachusetts robbery. Many people questioned the evidence against Sacco and Vanzetti, concluding that the two men were convicted more for their beliefs and Italian origin than for a crime. In spite of mass demonstrations and appeals, the two men were executed in 1927. The governor of Massachusetts eventually cleared the two men in 1977, 50 years after the fact.
The Resurgence of the Ku Klux Klan
Antiforeign nativist and racist attitudes encouraged a revival of the Ku Klux Klan. The first organization, active during the Reconstruction era, had died out in the late 1800s. A reorganized Klan, formed in 1915, grew slowly until 1920. In that year, it added 100,000 members, The Klan of the 1920s targeted not only African Americans but also Catholics, Jews, and immigrants. To the Klan, the only true Americans were white, Protestant, and American-born. In 1925, membership in the Klan peaked at 2 millop.
Restrictions on Immigration
The nativism and racism of the 1920s that was evident in the Red Scare, the Sacco and Vanzetti case, and the resurgence of the Klan was also present in immigration legislation of the era. Immigration had resumed after World War I, but there was less of a need for workers. In the postwar recession, immigrants were seen as taking jobs from returning American GIs and somehow threatened American values. The nativist climate led to the Immigration Act of 1924. This act established a system of national quotas, which limited the number of immigrants from each country. These quotas deliberately kept the totals for eastern and southern Europe low and excluded all immigration from Asia.
The Scopes Trial
The Scopes Trial, also known as the Monkey Trial, began on July 10, 1925. The defendant, John Thomas Scopes, was a high school science teacher who taught evolution in the classroom, which was said to violate the Butler Act, which prohibited the teaching of any theory that went against biblical doctrine or denied the theory of creationism.
From the website historynet.com: "The trial took place in Dayton, Tennessee, and was the result of a carefully orchestrated series of events that were intended to bring publicity, and therefore money, into the town by a group of local businessmen. In reality, Scopes was unsure of whether he had ever technically taught the theory of evolution, but he had reviewed the chapter in the evolution chapter in the textbook with students, and he agreed to incriminate himself so that the Butler Act could be challenged by the ACLU (American Civil Liberties Union). Several students were encouraged to testify against Scopes at the trial.
The Scopes Trial brought in hundreds of reporters from all over the country, and it was the first trial to be broadcast on radio. Both the prosecuting attorney and Scopes’ defense attorney were charismatic men and drew significant attention to the case, which for the defense was more about defeating the Butler Act then about defending Scopes. Scopes was found guilty and charged a fine of $100, but the verdict was thrown out on a technicality on an appeal. For the next few years, textbooks in Tennessee had all mention of evolution removed. The Butler Act was repealed in 1967."
These dilemmas brought to light some of the underlying issues in a country that otherwise seemed prosperous. However, dark times were ahead for Americans. Next time, we're going to examine the 1929 stock market crash.
Thursday, September 19, 2019
Monday, September 16, 2019
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