The roaring twenties, was an unprecedented time of peace and prosperity in the states. The market rose to record highs, as we saw in class Broadway grew immensely and was more popular than ever before, and people were just happy in general. That is why the market crash on that fateful tuesday in October came as such a shock. There were a number of factors that caused the market crash, but the biggest factor was the lack of understanding of how the market worked. People were buying insane amounts of stock and as a result the market grew immensely. The problem back then was, banks were lending people the majority of the value of the stocks they were buying. There wasn't enough money going into the market to sustain the growth and as a result the market crashed. On top of that, many farmers were having trouble paying the mortgages on their farms. Due to their mass production of crops, the amount of money they made per crop decreased, and as a result they couldn't make enough money each month to pay their mortgage. A large drought that occurred around the time of the market crash put the lichee pin in the farmers. Their crops became dried out and destroyed and the farmers went bankrupt. As a result of the farmers' bankruptcy, the banks handling their mortgages lost money and went bankrupt as well. Banks losing money, people losing money, unemployment rates skyrocketing, major drought and dustbowls, and general depression were the best descriptors for the end of the roaring twenties.
The recent market crash however, was caused by a crash in the housing market. The problem we had was that people were trying to take out mortgages they knew they couldn't afford. This wouldn't have been so bad if the banks hadn't been more greedy than usual and ignored credit checks and given out the mortgages. When these people couldn't pay back their mortgages, the banks started losing money and as a result property values dropped and the housing market crashed. The stock market crash was a ripple effect of the banks losing money. Because they had no money left, many investment banks went out of business and as a result the stock market crashed as well. As a result of this crash unemployment rates skyrocketed and many people lost their homes. However, having learned from the efforts of FDR and the previous market crash, we have responded quickly to this crash, and as a result are already on the path to recovery. The world today is still very unstable as a result of this crash though. Markets all over the world have been effected by our market, and unfortunately the conditions are very simlar to those that caused the first 2 world wars.
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