It started with a war

The roaring twenties, as they were christened, were bookended by two momentous events. First we had the end of World War I. The aftermath of WWI wasn't great for Germanys economy. After the war they were left with a bill of 132 billion marks in reparations to pay off. A task they completed about 1.5 years ago. Hyperinflation in 1921-23 in Germany lead to the Reparations Committee declaring Germany in default which in turn lead to the Dawes Plan. The U.S. being the dominate economic power invested heavily in Germany who could then continue their repayments. This boosted the economies leading to prosperity in many countries.

There was a slight recession after the war as most countries saw a downturn in manufacturing sectors however this did not last very long. Soldiers had returned from war with wages and they were greeted with many new products and innovations which to spend it on. Countries started to flourish, starting with the US other economies soon followed.

The 1920's were a time where jazz music could be heard, many technologies that were once a luxury became a reality for people as mass production made them affordable. People were able to buy cars. The increase of consumer demand had a knock on effect which lead to an increase in production and also to infrastructure developments, i.e. highways. More business, more money, more people in employment, all things that are good for an economy. Add them all up and you have a boom.

When business expand like they did in the 1920s there is a need to raise equity to fund the expansion, one way to do this is through issuing shares. In his paper  The Stock Market Boom and Crash of 1929 Revisited White notes that

"In 1927 $1474 million of new preferred and common shares were issued. By 1929 this reached $5924 million, with over $1billion of shares issued in September"

Irving Fisher declared on October 15th 1929 that "stock prices have reached what looks like a permanently high plateau."

As always there was a belief that prices could or would never fall. That was until October 24th 1929. On this day 11% of the markets total value was lost at the opening bell. On  October 28 and October 29 1929 the Dow Jones lost 12.82% and 11.73% respectively. In fact both these days rank in second and third place of the largest % losses of the Dow Jones.

The market started to recover after a while, however this was short lived. April 1931 the market started on another slide downhill for just over a year until it reached a low point of 42.84.


The Wall Street Crash brought the roaring twenties to an abrupt stop, ending what had been a decade full of promise.