How The Stock Market Changed After The Great Depression

After the Great War, the United States experienced a prosperous New Era economy that was built on sales and investments. As the stock market improved, many people saw an opportunity to make spectacular profits, which increased the amount of people making riskier investments. Bankers and brokers used the stock market as a way to aggressively market bonds to new investors during the 1920s . According to Ryan, one estimate claims the numbers of people owning stocks rose from half a million to fifteen million in the two decades before 1928. To aid in the sea of new investors, investment companies used new techniques such as allowing small investors to buy into trust and combining their assets with others that were in an actively managed account or “buying on margin.” The biggest problem was if the stock’s value fell below the amount necessary to cover the price of the loan, the buyer had to either put up more money, or risk losing his entire investment. New Era financiers, economists and analysts grew worried about the effect of the flood of speculators and amateur traders on the financial market (Ryan 131). …show more content…
During the last week of October, prices tumbled (Ryan 131-132). After October 29, 1929, prices continued to fall as the United States entered the Great Depression. When the market crashed, new investors lost all their money. When brokers made margin calls, they were forced to sell their businesses, cash in their life insurances, and ask banks to loan them even more money. Many people had predicted the crash, so they withdrew all their money in hopes of saving the money they had left; however since the banks had no restrictions and a limited amount of cash in their vaults, these banks soon went bankrupt. This caused people with no association with the stock market to also lose their money