SST2772-ABED_1: The Great Depression

During World War I, nations greatly increased their individual manufacturing capabilities. This increase was in order to meet the military demands of fighting a new kind of modern war that relied heavily on technologies developed in the industrial revolution. As a result, factories were expanded, and the latest machinery was installed. This meant nations could mass produce goods at a faster rate and in greater quantities than ever before.

After the end of WWI, the factories were modified to produce civilian goods. More workers were employed, and there was greater wealth generated for all classes. Prosperity increased, as did mass consumption of goods. More people were buying luxury goods, such as automobiles, which in turn stimulated more manufacturing. There was an explosion in the purchasing of household luxuries, whereby as many homeowners invested in telephones and radios. At the same time, the stock markets expanded their indexes, and banks began to advance large amounts of credit to borrowers. Everyone wanted to get into the action. Even housewives invested house money to try to increase their fortune.

Eventually, the markets were flooded with an excess of goods. People were not buying goods like they had before because they already had their cars, radios and carpet sweepers so manufacturers began to slow down their production. As production slowed more people were put out of work, banks were increasingly unable to collect on loans and investors were unwilling to put money into businesses.

People became increasingly nervous about the economic situation. The situation reached a climax in one day of frenzy on October 29, 1929 That day has since become known as Black Tuesday. Panic set in as investment values in company shares plummeted, banks failed, companies closed and people lost everything they owned literally overnight. The turmoil spread rapidly throughout the world as the world economy entered a period known as the Great Depression.