Critical Thinking 22-4!

Judging from the events of the late 1920s and early 1930s, how important do you think public confidence is to the health of the economy?

Public confidence was something that really influence the health of the economy. In the late 1920s and early 1930s it was shown that the United States citizens were showing a over confidence in the stock market. As the stock market grew to be a symbol of a prosperous American economy, more and more people stated to show confidence and a desire to invest in the stock market. The market was growing fast and people wanted to take advantage of this situation called a "bull market" were they would buy the stocks while the stocks were rising. So many wealthy or wealthy hopefuls had bought stock at this point that around out 4 million people held shares in 1929. Most of these people were living in the now and only thinking about what they were buying in speculation terms, were you would buy money for quick profit instead of taking in to account the possible negative ramifications. Americans showed such a confidence in the market that it lead to irresponsible activities like buying on margin, where you pay some for the stock and then take out a loan for the rest. This was a bad idea because if the people lost money in the stock market then how would they be able to pay off the money that they had been loaned in the first place. All this buying lead to a peak in prices and then a recession where the prices would start to fall. This then lead to much panic as people tried to pull out to trying and save there money, but it was useless for many when the bottom of the market fell out and prices plunged so low that many lots all they had. With the decline in prices came a decline in people confidence. This overwhelming confidence that they could make money now and forget the future lead to some serious peoples that the Americans would have to face through the 1930s.