Boom and BustBoom and Bust

Canada in the Canada in the 1920s1920s

In the 1920s …In the 1920s …Canada’s economy recovered quickly after Canada’s economy recovered quickly after

WWIWWIBy the mid 1920s the economy was By the mid 1920s the economy was

boomingbooming

BoomBoom

When the When the economy is booming economy is booming companies and those who work for them companies and those who work for them are doing very wellare doing very well

The factors of the BoomThe factors of the Boom

Canadian Canadian industryindustry had been had been boosted by boosted by the war.the war.

o Mass productionMass production - cars, radios, - cars, radios, refrigerators etc.refrigerators etc.

EmploymentEmployment – Most people could find a job – Most people could find a job if they wanted one.if they wanted one.

Credit Buying - Credit Buying - People bought things on People bought things on credit. credit. Buy now, pay laterBuy now, pay later

Prosperity CycleProsperity Cycle

High demand for goods•People want cars, toasters

radios and fridges

People who are workingwant to buy more

things

Companies have to hire more people to make

the products

Companies make moreproducts to sell to

customers

Profits

ProsperityProsperity With more money to spend people invested in With more money to spend people invested in

the stock market.the stock market.

Stocks are a part of a company.Stocks are a part of a company.

When you buy stocks you own a small part of When you buy stocks you own a small part of the companythe company

When the company does well you make money When the company does well you make money on your stockson your stocks

You buy 100 stocks or shares Of a company for $1 each

100 x $1= $100

The companydoes well

and stock pricesrise

When the stocksare $5 each

you sell

100 x 5= $500$400 profit

How it works

Regular people seestocks as an easy

way to make money

As a result …As a result …

Many Canadians were confident about the Many Canadians were confident about the economy.economy.

ConfidenceConfidence

Share prices were going up fast.

People were getting richer.

Stock Market SpeculationStock Market Speculation

Canadian industry booms, price of shares rises.Canadian industry booms, price of shares rises.

Investors sell their shares at higher prices and make Investors sell their shares at higher prices and make huge profits.huge profits.

Get Rich! Quick!!

Continued speculationContinued speculation More people invest, pushing More people invest, pushing

stock prices higherstock prices higher

People buy People buy ‘on the margin’‘on the margin’

This means they bought stocks This means they bought stocks without paying for them up frontwithout paying for them up front

Let’s get Let’s get RICH !RICH !

But was everyone so But was everyone so confident?confident?

Beneath the ‘Boom’Beneath the ‘Boom’ FarmersFarmers did not prosper - new machines produced did not prosper - new machines produced

more which lowered prices.more which lowered prices.

The poorThe poor did not prosper – many were did not prosper – many were laid them off and moved to cities looking laid them off and moved to cities looking for work. for work.

Recent immigrantsRecent immigrants did not prosper - did not prosper - they were given low paid jobs and lived in they were given low paid jobs and lived in overcrowded conditions.overcrowded conditions.

Workers in ‘old’ industriesWorkers in ‘old’ industries (eg. mining, (eg. mining, textiles) did not prosper - they were low textiles) did not prosper - they were low paid.paid.

Beneath the ‘Boom’Beneath the ‘Boom’

50% of Canadian families earned less than 50% of Canadian families earned less than $2000 a year.$2000 a year.

Canadian industry was producing too many Canadian industry was producing too many goods.goods.

The Coming CrashThe Coming Crash

20 million shareholders by summer 1929

Prices reach an all time high

Experts start to worry

Profits Fall

Car and Steel Production falls

People start to Sell

Black TuesdayBlack Tuesday

Tuesday, October 29Tuesday, October 29thth, 1928, 1928Million shares sold.Million shares sold.No buyers found.No buyers found.Many investors are ruined.Many investors are ruined.

BustBust

Millions of shares are now worthless

Crash !

Re-CapRe-CapOverproduction

+Underlying poverty Stocks of unsold goods

Demand falls

Profits Fall

People start to sell shares

Panic.

CRASH

Lack ofconfidence

Millions of people are left penniless, Millions of people are left penniless, unemployed, homeless and destituteunemployed, homeless and destitute

The Great Depression Begins!