Why Did People Lose Money During the Depression?
The 1920's in the United States was a period of optimism. The recent creation of the Federal Reserve was expected to add stability to the economy. Speculators rushed to the stock market. The Federal Reserve tried to slow expansion but ended up instigating economic recession.
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Banks
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More than 10,000 banks failed from 1929 to 1933, and customers lost their money.
Consolidation
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The accelerating pace of business mergers following World War I consolidated 50% of corporate wealth in only 200 companies. The result meant that failure at a few strategic businesses would harm the entire U.S. economy.
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Stock Market
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The market began unwinding on October 24, 1929, and crashed on October 29 (Black Tuesday). Stock market losses for the month totaled $16 billion, which destroyed fortunes overnight.
Taxation
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The libertarian Cato Institute research suggests President Hoover's tax policies actually resulted in the non-wealthy paying a higher percentage of the tax burden in 1932 than the previous year, while the wealthy's share declined.
Real Estate
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Easy credit of the 1920's created a leverage bubble and people invested heavily in commodities like real estate. When prices plummeted, land was worth less than when it was purchased.
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