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!