GCCCD Stock Market Crash Questions

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DB 2: Stock Market Crash

Watch the above video. Once you have done this post a response to each of the bullets below. 

What were the major differences between the 1920s and the 1930s?

How did the end of WWI affect the U.S. economy?

Explain the relationship between Liberty Bonds, “Investing Culture”, Margin Buying, and the rapid appreciation of stock values in the 1920s?

Why did the major bankers meet at J.P Morgan’s office across the street from the NYSE? What did they subsequently do?

How did the “Liquidity Crisis” compound an even greater contraction in GDP after stock prices collapsed?

What means did Roosevelt implement to help stabilize stock markets immediately and long-term?

What effects did the Great Depression have internationally? Do you see any parallels today?



1)In the 1920’s, Americans lived with prosperity and optimism. Many were able to afford the new technology of that time and have confidence in the Stock Market. However, the 1930’s was a complete opposite. Many lost their jobs and everything they had. Many were poor and homeless, even having to live in makeshift towns called “Hoovervilles”. Americans did not trust the stock market and the economy as a whole.

2)At the end of WW1, Americans were very optimistic because they had won the war and felt that all insecurities were a thing of the past. They felt positive about the economy especially since it was growing. Factors that contributed to the economic growth included the improving technological changes and the consumers’ willingness to buy newer inventions such as radios and cars.

3) During the 20’s it became popular for Americans to purchase Liberty Bonds. These bonds would allow Americans to loan money to the government to help pay the debt from WW1, and in return they would get payments back with interest. Liberty Bonds affected the Investing Culture of that time because it was getting even the average American accustomed to the practice of investing in securities. Eventually, brokerage firms emerged and began to offer Margin Buying, in which the brokers would loan clients money to invest in stocks. This influenced the Investing Culture even more because now many Americans had the opportunity to invest in stocks and bonds, which improved the economy and made investing seem like a normal thing to do. This increasing demand of buying stocks drove up the prices, which led to the rapid appreciation of stocks.

4)All the major bankers met at the offices of J.P. Morgan to discuss what they could do to support the stock market, which was spiraling down. They decided to put 250 million dollars into a key list of stocks so that confidence in the stock market might increase again.

5) Many banks failed because Americans lost confidence in the banks and took out all their money at once. This lack of cash in the banks caused them to fail. Also, brokerage firms and other firms started to go bankrupt because before they were able to survive on loans. However, nobody wanted or couldn’t give them loans anymore so there was no source of cash flowing in to help them stay afloat.

6)Roosevelt implemented many regulations to help boost confidence in the stock market. He created the Securities and Exchange Commission that was put to “clean up” Wall Street of its corrupt practices.

7)The effects of the Great Depression affected other countries as well. For example, in Great Britain there was a decrease in manufacturing and many lost their jobs. Germany suffered even more, which stirred up people’s confidence in leaders such as Adolf Hitler. There are some parallels of what happened in the 1920’s to our time. Because regulations of the stock market loosened, there have been problems in our economy since. For example, the Recession of 2008 was caused in part by investors not being careful of how loans were handled.


  • In the early 1920s, most Americans invested by buying stocks sold in the stock market. They were even taking loans to buy more shares as the economy was growing. At the end of the 1920s, the economy was slowing down and by 24 October 1929, the stock market crashed as prices of stock fell. Many people lost their jobs as businesses and factories shut down. The major difference is that in the 1930s they experienced the effect of the Great Depression unlike in the 1920s where there were more jobs, the unemployment rate in the nation rose in the 1930s since the economy had deteriorated.
  • After the end of WW1, the U.S economy was affected as it dropped temporally because of stopping the production of war materials. However, at that time, the US was the only country that was not highly affected by the war. Companies in the US were able to reach the world as they expand and domestic consumption increased in the country.
  • Liberty bond was been sold by the US government to the people to fund the government during WW1 and later on, the government would pay interested based on the value of the bond. Margin buying come about where investors were borrowing money from brokers so that they can buy more stock and pay the brokers back their money with interest. The stock price was rising rapidly than the dividends because investors were attracted to companies that did not pay dividends. The relationship with all this is that the intended goal was to gain interest from the investment made.
  • The bankers meet at J.P Morgan’s office so that they can discuss a way forward to avoid a total financial meltdown and figure a way to support the stock market. They decided to pool together $250 million, to be used to fund the key list in the stock markets and restore the vote of confidence in the stock market.
  • The “liquidity Crisis” which was the reduction of money supply led to many factories been shut down and thus affecting the GDP as the economy was affected and most people lost their jobs, which led to an increasing rate of poverty.
  • Roosevelt started a series of reforms and implemented the New Deal that was federally funded, and involved a series of improving infrastructure and projects across the US. By doing this, it created jobs for the workers and gains for the businesses.
  • In all countries, they experience Great Depression caused by the US to both the rich and the poor countries, it caused international trade to fall by 50% and affected worldwide GDP as it also fell by 15%. There is a parallel trend between the years 2008 and 2009 during the Great Recession, where the world GDP fell by 1%.

Hello Halie, I’m with you that in 1920s the Americans they were smart that they were investing stocks in everything that way they made their economy and even they started to make new technologies like planes, cars and etc. But after that the Americans life got changed 180 degree to the worst and the people didn’t have enough money to live normally.



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