The Great Depression
Optimism and Prosperity
When Americans elected Herbert Hoover President in 1928, the mood of the general public was one of optimism and confidence in the United States economy. Most people believed that national prosperity would continue indefinitely. In his acceptance speech for the Republican party nomination for the presidency, Hoover had said:
"We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us."
Most economists of the 1920s believed that the stock market was the chief indicator of the economic health of the United States. In September of 1929, stock prices began to fluctuate, but market analysts dismissed this as temporary. What many of these analysts did not realize--or refused to admit--however, was that stock prices were totally out of proportion to actual profits. Sales of goods and the construction of factories were falling rapidly while stock values continued to rise.
Still, very few were worried; they still accepted Adam Smith's "self-adjusting economy" as dogma and believed the problems would correct themselves.
Historians refer to October 24, 1929 as "Black Thursday." On this day, people began dumping their stocks as quickly as they could. Sell orders flooded the market exchanges and the bull market suddenly shifted to a bear market. By that evening, J.P. Morgan and other financiers bought up stock to stop the panic and keep the market going. On Friday, October 25, the House of Morgan continued to keep the market stable and it seemed that the panic was over. Yet, many investors began to worry during the weekend. George and Martha and thousands of their friends decided to sell whatever stock they still had as soon as the market opened on Monday. As a...