After the stock market crash in 1929, where did/had all the moeny gone?

Question

On the TV it spoke of $30billion was active, then everyone sold, the market crashed and so many people lost money. Where did it go? Was it just a superimposed amount of money or did it actually generate that much cash, did that sum actually physically exist? They spoke of people making losses and loosing life savings and homes. Did anyone make any money from the crash (apart from debt collectors). If the '$30billion' figure existed and led to the crash then how come a maximum limit isn't set, even a virtual maximum limit? Am I trying to simplify an extremely complicated process?

Answer 1

The money was profits on paper -- the difference between what people had paid for stocks and the value of the stocks immediately prior to the crash. When the market tanked, those paper profits vaporized into thin air.

Much of the investment at the time was leveraged, i.e. investors borrowed funds from banks to invest in an overheated stock market. The significance of that will be apparent in a moment.

Many banks failed as people scrambled to withdraw the funds that they had on deposit. Banks only have a relatively small portion of their depositors funds on hand in the form of cash. Some of it is lent to other customers for home purchases and other purpose and some of it is invested in stocks and bonds. Much of the money on loan was loaned to speculators who invested the loan proceeds in the market. As the market tanked, the deposits invested in the markets disappeared as the underlying securities became worthless. Borrowers lost jobs as businesses failed and were unable to repay their loans. Investors who had borrowed funds were unable to repay their loans since their portfolios were worth less than the money that they owed to the banks. The resulting domino effect lead to the failure of many banks and the loss of the funds on deposit in those banks.

This is an oversimplification of all of the underlying dynamics involved in the 1929 crash but outlines the basics of what happened. Bank deposits are guaranteed by the FDIC as a result of what happened in '29 and banking laws were toughened significantly to limit the likelihood of such a failure again.

Answer 2

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Answer 3

Money in the United States no longer has a physical backing. During the 1800's the US still operated on the gold standard. Meaning all money was back by gold or other physical valuables. Now the US and most of the world does not operate this way. For example if the US had 1 billion in gold than 1 billion dollars was the total economy. Now we no longer print or back money with physical objects. Money is created mostly electronically or on paper. Meaning the US has money on paper that is not necessarily printed. The stock market crashed because the money on paper disappeared not the printed money. Example your house goes up in value 30,000 dollars the US government does not run out and print 30,000 one dollar bills. The real estate market declines and now your house has gone down in value 15,000 the only thing that has changed is the paperwork not the circulation of money in the economy.

Answer 4

A good question but one of those tricky to answer.
Basically there are two important prices when you buy shares.
The price you pay and the price you sell them.
So if I buy a share @1GP it does n't matter one whole hoot if the price goes up to 100GBP opr goes down top say0.009GBp.
What does count is the price I sell at.
So if I sell @ 1.50GBP I've made a profit. of course if I sell for less than that I have not BUT Firms pay dividends. So I may earn a share hoilders bonus of say 0.07GBP. So it depends on how long I hold the shares and what dividends I get. NOW the TRICKY PART A one pound share in a firm is worth one pound. This is despite people paying £345 for a one pound share. and to answer your question. If a person invested all his cash in stocks and shares and say had a spread of a few companies. If the stock went down and the firm went bust they would indeed have lost all their money. No one would want to buy their 'worthless shares' or would they? People are greedy. Someone would think it a risk to buy those worthless shares for say 100th of the cost paid knowing that A. the firm would go up again and they would sell to make a quick prift. If I buy @1p and sell @2p I ve made 100 percent. The other thing is that the firms have assetts. buildings and materials and made up products. So if the firm sold all these the investors would get some money back. I know this hasn't answered the question fully but I hope I have explained some factors.

Answer 5

Television was invented after WWII as an offshoot of Radar developed during the war. Privately owned televisions didn't exist until the 1950"s. Only the very wealthy had one. The didn't become common in homes until the late 50's early 60's. So did FDR go on a television that wasn't invented yet. I doubt it. First president to appear on television was Eisenhower.

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Answer 9

If you hold a General Electric share and you sell it in 1929 for $1.00 USD then your money goes to your brokerage account and then you can move your money to your bank account and then write yourself a check and then buy a few things.

If you went to Sears to buy a new hat then your money went to Sears.

If you went to JC Penny to buy a new tie then your money went to JC Penny.

Yes, many people make a lot of money from the Market Crash.

The guy who bought that General Electric share from you for $1.00 could hold it for a few years and then sell it for $10.00 or $100.00 or still hold it today (It's been almost 80 years and General Electric is still alive and kicking)

Anybody buying cheap stocks and waiting until the stock market recovers would make a ton of money

You cannot set a maximum limit.
If somebody wants to pay $100,000.00 for a single share of Berkshire Hathaway then we let him buy it.

You need MONEY to buy shares.
Back then the USD was actually backed by Gold and not like today which is only a worthless piece of paper and not backed by anything.

The United States of America could print a chamillion dollars today.

Back then you needed real gold to back a currency.

This means the gold was stored somewhere and the money used to buy stocks was real.

You don't actually make any money in the Stock Market if you don't sell your shares.

If you have 100 shares of General Electric at $10.00 for a total of $1,000.00 then you don't actually have $1,000.00 in your bank account.

You have $1,000.00 in your brokerage account.
You cannot go to Wal-Mart and pay with shares.

This means you need to SELL YOUR SHARES first.

If you hold your shares and the market crashes all the way down to $1.00 per share and you now have only $100.00 in your brokerage account then your money does not goes anywhere because you never had any real money to begin with.

You need to sell to make real money.

The actual number of dollar bills in the entire United States of America is the same one day before the crash and one day after the crash.

No wealth was created or destroyed.

You cannot pretend you are a millionaire only because you have a lot of Google shares.

You need to sell them to spend that money.

Shares are not money.

If you drive a $100,000.00 Mercedes Benz and somebody else has $100,000.00 in the bank then you are not the same.

If you need to sell your car in a hurry then you cannot just go to Ebay and sell it for $100,000.00

Perhaps you will sell it for $70,000.00

The other person will write himself a check and will collect the entire $100,000.00

In this example it APPEARS both are equally rich.
In reality the one with the Mercedes is actually poorer.

I hope you understand.

This is why most celebrities APPEAR to be millionaires but in reality they don't have any money.

Yes, they may live in a $10,000,000.00 USD but you cannot really sell it for $10,000,000.00 USD if you wanted.


I hope you understand.
If you need a more detailed answer then you can email me.

Answer 10

where do you think it go's same place as all loose money go's into the goverments retirement funds an war funds etc