Welcome to THE MAKING OF A NATION -- American history in VOA Special English.nThe election of Herbert Hoover in 1928 made Americans more hop...
Welcome to THE MAKING OF A NATION -- American history in VOA Special English.nThe election of Herbert Hoover in 1928 made Americans more hopeful than ever about their future.nSome experts pointed to danger signs in the economy during the summer of 1929. The number of houses being built was dropping. Industries were reducing the amount of products that they held in their factories. The rate of growth in spending by average Americans was falling sharply. And industrial production, employment, and prices were down.nThese experts warned that the American economy was just not strong enough to support such rapid growth in stock prices. They said there was no real value behind many of the high prices. They said a stock price could not increase 4 times while a company's sales stayed the same. They said the high prices were built on foolish dreams of wealth, not real value.nBut the prices went still higher. Buyers fought with each other to pay more and more for company stocks. The average price of all stocks almost doubled in just 1 year.nIt seemed everybody was buying stocks, even people with little money or economic training.nThe stock market collapsed on Thursday, October 24th, 1929. People remember the day as "Black Thursday," the day the dreams ended.nThe day began with a wave of selling. People from across the country sent messages to their stock traders in New York. All the messages said the same thing: Sell! Sell the stocks at any price possible! But no 1 was buying. And so down the prices came.nThe value of stock for the Montgomery Ward store dropped from eighty-three dollars to fifty in a single day. The RCA radio corporation fell from sixty-eight dollars to forty-four -- down 24 dollars in just a few hours. Down the stocks fell, lower and lower.nSeveral of the country's leading bankers met to discuss ways to stop the disaster. They agreed to buy stocks in large amounts to stop the wave of selling. The bankers moved quickly. And for 2 days, prices held steady.nBut then, like snow falling down the side of a mountain, the stocks dropped again. Prices went to amazingly low levels. 1 business newspaper said simply: "The present week has witnessed the greatest stock market disaster of all time."nThe stock market crash ruined 1000s of Americans. In a few short weeks, traders lost thirty billion dollars, an amount almost as great as all the money the United States had spent in World War One.nBut the stock market crash was nothing to laugh about. It destroyed much of the money that Americans had saved. Even worse, it caused 1,000,000s of people to worry and lose faith in the economy. They were not sure what to expect tomorrow. Business owners would not spend money for new factories or business operations. Instead, they decided to wait and see what would happen.nThis reduced production and caused more workers to lose their jobs. Fewer workers meant fewer people with money to buy goods. And fewer people buying goods meant less need for factories to produce. So it went. In short, economic disaster.nWhy did the stock market crash? 1 reason, people had been paying too much for stocks. Everyone believed that prices would go higher and higher forever. People paid more for stocks than the stocks were worth. They hoped to sell the stocks at even higher prices.nIt was like a children's balloon that expands with air, blowing bigger and bigger until it bursts.nBut there were other important reasons. Industrial profits were too high and wages too low. 5 percent of the population owned one-third of all personal income. The average worker simply did not have enough money to buy enough of all the new goods that factories were producing. Another problem was that companies were not investing enough money in new factories and supplies.nThere were also problems with the rules of the stock market itself. People were allowed to buy stocks when they did not have the money to do so.nThe stock market crash marked the beginning of the Great Depression-- a long, slow, painful fall to the worst economic crisis in American history. The Depression would bring suffering to 1,000,000s of people. It would cause major political changes. And it would be a major force in creating the conditions that led to World War Two.nWe will look at the beginning of the Great Depression in our next program. Less
