Boom and Bust Canada in the 1920s

In the 1920s … Canada’s economy recovered quickly after WWI Canada’s economy recovered quickly after WWI By the mid 1920s the economy was booming By the mid 1920s the economy was booming

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

The factors of the Boom Canadian industry had been boosted by the war. Canadian industry had been boosted by the war. o Mass production - cars, radios, refrigerators etc. Employment – Most people could find a job if they wanted one. Employment – Most people could find a job if they wanted one. Credit Buying - People bought things on credit. Buy now, pay later Credit Buying - People bought things on credit. Buy now, pay later

Prosperity Cycle High demand for goods People want cars, toasters radios and fridges People who are working want to buy more things Companies have to hire more people to make the products Companies make more products to sell to customers Profits

Prosperity With more money to spend people invested in the stock market. With more money to spend people invested in 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 the company When you buy stocks you own a small part of the company When the company does well you make money on your stocks When the company does well you make money on your stocks

You buy 100 stocks or shares Of a company for $1 each 100 x $1= $100 The company does well and stock prices rise When the stocks are $5 each you sell 100 x 5= $500 $400 profit How it works Regular people see stocks as an easy way to make money

As a result … Many Canadians were confident about the economy. Many Canadians were confident about the economy.

Confidence Share prices were going up fast. People were getting richer.

Stock 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 huge profits. Investors sell their shares at higher prices and make huge profits. Get Rich! Quick!!

Continued speculation More people invest, pushing stock prices higher More people invest, pushing stock prices higher People buy ‘on the margin’ People buy ‘on the margin’ This means they bought stocks without paying for them up front Let’s get RICH ! Let’s get RICH !

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

Beneath the ‘Boom’ Farmers did not prosper - new machines produced more which lowered prices. Farmers did not prosper - new machines produced more which lowered prices.

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

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

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

Beneath the ‘Boom’ 50% of Canadian families earned less than $2000 a year. 50% of Canadian families earned less than $2000 a year. Canadian industry was producing too many goods. Canadian industry was producing too many goods.

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

Bust Millions of shares are now worthless Crash !

Re-Cap Overproduction + Underlying poverty Stocks of unsold goods Demand falls Profits Fall People start to sell shares Panic. CRASH Lack of confidence

Millions of people are left penniless, unemployed, homeless and destitute The Great Depression Begins!