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Crash And Depression

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Crash And Depression by Herminne Tonita -

In the heart of New York lies a narrow street enclosed by the walls of a high office building. Its name is Wall Street.

One Thursday afternoon in October 1929, a workman outside an upper floor window of a Wall Street office found himself staring into the eyes of four policemen. They reached out to catch hold of him. "Don't jump!" shouted one of the policemen. "It's not that bad!" "Who's going to jump?" asked the surprised worker. "I'm just washing windows".

To understand this incident we need to look at what had been happening in Wall Street in the months and years before that October afternoon in 1929.

Wall Street is the home of the New York Stock Exchange. Here dealers called stockbrokers buy and sell valuable pieces of paper. The pieces of paper are shar e certificates. Each certificate represents a certain amount of money invested in a company.

Every year in the 1920s the sales of cars, radios, and other consumer goods rose. This meant bigger profits for the firms which made them. This in turn sent up the values of shares in such firms.

Owning shares in a business gives you the right to a share of its profits. But you can make money from shares in another way. You can buy them at one price, then , if the company does well, sell them later at a higher one.

More and more people were eager to get some of this easy money. By 1929 buying and selling shares" playing the market" had become almost a national hobby. Like most other things in the United Sates in the 1920s, you could buy shares on credit. Many people borrowed large amounts of money from the banks to buy shares in this way.

By the fall of 1929 the urge to buy shares had become a sort of fever. Prices went up and up. One visitor to Wall Street was reminded of a street fight, as stockbrokers pushed and scrambled to buy shares for their customers.

Yet some people began to have doubts. The true value of shares in a business firm depends upon its profits. By the fall of 1929 the profits being made by many American firms had been decreasing for some time. By the end of the year the value of all shares had dropped by 40,000 million $. Many people had to face debt and ruin. Some committed suicide. This was what the policemen thought that the window cleaner was planning.

This collapse of American share prices was known as the Wall Street Crash. It marked the end of the prosperity of the 1920s. The Crush made people uncertain about the future. By the end of 1931 nearly 8 million Americans were out of work. Many were soon without homes or food and had to live on charity. Millions spent hours shuffling slowly forward in "breadlines" to receive free pieces of bread or bowls of soup, paid by money collected from those who could afford it.

By 1932 the position was worse still. Thousands of banks had closed down.
Crash And Depression written by Herminne Tonita for FamousWhy.com
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Crash And Depression Image Source: answers.com Author: Ramy Majouji



Tags: dealers, wall street, crash, profit



Category: Business Articles  - ( Business Articles Archive)

Date Added: 13 June '07


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