Al Capone
...of money, having a decent house, and a wonderful family. Through most of the 1920s stock prices rose steadily, eager to take advantage of this market many Americans rushed to buy stocks and bonds. By 1929 about 4 million Americans owned stocks. Many of these investors were already wealthy, but others were average Americans who hoped to strike it rich. As stock prices rose, several problems became evident.
More and more investors were engaging in speculation, the buying of stocks and bonds on the chance that they might make a quick or a large profit, ignoring the risks. Their unrestrained buying and selling fueled the market’s upward spiral. As prices rose, wealth was generated on paper, but it bore little relation to the real worth of companies or the goods that they produced. The price of stocks had little relationship to the dividends the stocks paid.
Furthermore many investors began buying on margin or paying a small percentage of a stocks price as a down payment and borrowing the rest. With stockbrokers willing to lend buyers up to 75 perfect of a stock’s purchase price, buying on margin became the rule. This system worked as long as prices continued to rise, since investors could sell their inflated stocks to make a profit and pay off their debt. If stocks declined however, there was no way to pay off the loan.
Although many Americans appeared prosperous during the 1920s in fact they were living beyond their means. They often bought goods on credit, which meant they could buy now, and pay later. By making credit easily available businesses encouraged Americans to pile up a large consumer debt. Many people then had trouble paying off their growing debts. Faced with debts, consumers cut back on spending.
As farmers’ incomes fell, they bought fewer goods and services. Without money to spend, rural families could not buy the products of American...
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