What was the Wall Street crash

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Q.� How did it all start

A.� Share prices rose year after year in America in the 1920s. Many Americans believed they could make money easily by investing in shares. The market was virtually without controls and - unlike today - investors were not warned that 'share prices can go down as well as up'.

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Q.� What about consumer goods

A.� Expenditure was also immense. More and more people bought - and businesses were encouraging people to buy on credit. Hire purchase was easily available. Nobody seemed to understand the consequences of failing to meet repayments.

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Q.� Could you buy shares on credit

A.� Yes. It was known as 'buying on the margin' and enabled speculators to sell shares at a profit before paying what they owed. In this way it was possible to make a considerable amount of money without a great deal of investment. The pitfalls, with hindsight, are obvious. But this was a buoyant era. Everyone thought they were backing a winner. John Jaskob, in a newspaper featured entitled Everybody Ought to be Rich, claimed that by investing $15 a month in stocks and shares it would be possible to make $80,000 over the next 20 years. Another writer said in 1929 that it had become so easy to make money on Wall Street, that it had ceased to become a gamble.

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Q.� And then ...

A.� Crash! On 3 September, 1929 (exactly 10 years before another disaster) the stock market reached an all-time high. In the following weeks, prices fell gradually. Then on 24 October, nearly 13 million shares were sold. Prices fell dramatically as sellers tried to find people willing to buy their shares. That evening, five of the country's bankers issued a statement saying that due to the heavy selling of shares, many were now under-priced. This statement was largely ignored. On 29 October, more than 16 million shares were sold. The market had now lost 47% of its value in 26 days.

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Q.� So most Americans held shares

A.� No - less than 1%. However, the crash had a tremendous impact on the whole population because the fall in prices made it difficult for entrepreneurs to raise the money needed to run their businesses. Soon, 100,000 American companies shut, with huge job losses. There was no national system of unemployment benefit - as there was in Great Britain - so the purchasing power of the American people fell dramatically. This led to even more unemployment.

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Q.� How was this problem solved

A.� Partly by a programme known as the New Deal. I'll write about that later. The crash, however, caused a completely different outlook by most Americans.

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Q.� How

A.� They lost virtually all confidence in investment. People now began to save - and many even drew their money out of banks and kept it at home. Many more companies went bankrupt as people stopped spending. By 1933 unemployment was at 13 million. The jobless often lost their homes and were forced out on to the streets. Many began to live in shanty-towns on the outskirts of cities.

They became known as 'Hoovervilles' after President Herbert Hoover, who did little to help the unemployed.

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Q.� And how did this all lead to Hitler

A.� Germany was worst affected by the Depression - because it was depending on loans from America to help pay the reparations set by the Treaty of Versailles. Unemployment in Germany rose very quickly. Hitler and the Nazis used unemployment to gain support in the general elections from 1930 to 1933. He posed as Germany's 'last hope'. The desperate Germans believed him.

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Steve Cunningham