The boom of the 1920s was based on selling more and more goods. But by 1929, the U.S. industry was running out of customers. Americans could not go on spending forever: there was a limit to how many specific products people could buy and the U.S. industry could not sell abroad because other countries had put up tariffs (a tax imposed on imported goods and services) in retaliation to the USA. By 1929 there was a growing surplus of manufactured goods and large numbers of workers that became unemployed.
Making it simple to buy products as well as have them delivered, the economic boomed was based on credit. With the help of advertisement, the increase of purchases made by the public had helped the stock market by bring Wall Street out of its 18 month recession.
As US industry boomed, so did company shares on the stock market. Prices of shares went up, year after year. This was based on confidence that the boom would last. Speculators brought shares, hoping to make easy money. Some people borrowed money to buy shares; others bought ‘on the margin’ that is, only paying 10% of their value, hoping to make enough money to pay the full price later. People did not realize that buying a share was a gamble and that they could lose all of their money.
As US industry boomed, so did company shares on the stock market. Prices of shares went up, year after year. This was based on confidence that the boom would last. Speculators brought shares, hoping to make easy money. Some people borrowed money to buy shares; others bought ‘on the margin’ that is, only paying 10% of their value, hoping to make enough money to pay the full price later. People did not realize that buying a share was a gamble and that they could lose all of their money.