During the 1920s, Wall Street in New York City had been experiencing a Bull Market, or continuously rising stock market prices due to the optimism and confidence of investors. Stock prices were higher than ever before in America, showing great economic growth. However, in 1929, the stock market crashed, and prices decreased at an even faster rate. In fact, in 1933, prices hit bottom, falling 80% from their height during the roaring twenties ("Stock Market Crash"). The crash had a tremendous impact on the nation's economy. Most importantly, banks began to fail. They tried to collect loans made to investors who did not have the money to pay them back (due to their losses in the stock market), resulting in the closure of almost half of America's banks by 1933 ("Stock Market Crash"). When ordinary citizens heard that banks were failing, they rushed to withdraw their savings, causing the bank crisis to worsen. This crisis lead to significantly reduced levels of spending and therefore decreased levels of production. Thus, the economy worsened as output from factories declined and unemployment escalated (Danzer). Ultimately, the stock market crash, its causes and effects, and the philosophies of the Presidents of the 1920s lead to the start of the Great Depression. |