1. Economics in the 1920s
From Boom to Bust

2. Investors
The 1920s was a time of prosperity and cultural revolution in North America,
1 in 2 Canadian families owned a car by 1928
By 1929, over 60% of Canadians had electricity in the home.
The government did not regulate the stock market so investors could invest however they wanted
This was known as Laissez-faire capitalism

3. The Stock Market
By the 1920s many businesses were too large to be owned by just one person or family
When the companies needed money, they sold shares to investors
Share prices were determined by supply and demand
If a stock was popular its price rose
If more people wanted to sell, the price fell

4. Investors Part 2
Careful investors would investigate the company’s prospects before investing in their stock
Stock values went up dramatically throughout the 1920s
Investors made huge profits on paper
The cost of a company’s stock had no relationship to their actual earnings

5. Taking Risks
Compared to the general public, the actual number of investors was low
Most people saw the stock market as a “get rich quick” scheme
Investors bought on margin paying the broker only 10-15% of the price of the shares
When the stock rose, they would pay the difference with the profits
If the stock fell, the broker could make a margin call and the investor would have to pay back all the money they owed
No one worried about margin calls because the stock market was growing too fast

6. Consumerism Canadians became “buy now, pay later” consumers
Retailers encouraged people to “buy on time” so they could pay for their purchases over two to five years with a small down payment
This encouraged people to buy more and more products and retail businesses were very successful

7. Those Who Didn’t Prosper
Life was harder for immigrants who did not speak English and had few job skills
Employers took advantage of them paying as little as possible
Women were paid less than men for doing the same job
Companies made huge profits but did not pass that on to their employees
Many workers could not afford to buy the products they were making leading to surplus goods piling up in warehouses and stores

8. Warning Signs Most people though the booming 1920s would last forever
Some economists saw the danger signals
The rich got richer while workers, immigrants, and farmers did not have enough money to buy their share of the goods