The Stock Market Crash
(1921-1929)
- Between 1921 to the beginning of 1929, stock prices had increased hugely. In hopes of slowing down the speedy rise in stock prices, the Federal Reserve raised interest rates. The higher interest rates depressed car and construction purchases, leading to a decrease in production.
- By the end of 1929, U.S. stock prices had reached an extremely high rate, making people unable to invest. After few specific events led to price declines, investors lost confidence and the stock market bursted.
- “Panic Selling”: many stocks had been bought using loans from a small fraction of the stocks value. The price declines forced some investors to cash their holdings in order to prevent future problems. Between the high in September and the low in November, stock prices decreased by 33%. This dramatic decline is referred to as the Stock Market Crash of 1929.