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History, The Great Depression

upward spiral, great crash, easy credit, Great Depression, downward spiral

In 1929, Hoover’s first year as president, the prosperity of the 1920s capsized. Stock prices climbed to unprecedented heights, as investors speculated in the stock market. The speculative binge, in which people bought and sold stocks for higher and higher prices, was fueled by easy credit, which allowed purchasers to buy stock “on margin.” If the price of the stock increased, the purchaser made money; if the price fell, the purchaser had to find the money elsewhere to pay off the loan. More and more investors poured money into stocks. Unrestrained buying and selling fed an upward spiral that ended on October 24, 1929, when the stock market collapsed. The great crash shattered the economy. Fortunes vanished in days. Consumers stopped buying, businesses retrenched, banks cut off credit, and a downward spiral began. The Great Depression that began in 1929 would last through the 1930s.

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