During the prosperous times after the First World War, marked by high wages and increased production and consumption of goods, many people had developed a craze to invest their savings and earnings for buying stocks on margin. The demand for these stocks and the good state of North American economy, led to an increase in stock prices. People invested billions of dollars in the stock market, selling almost everything that they possessed.
By August 1929 stockbrokers were carrying on margin for their clients approximately 300 million shares of stock. Known as “Black Tuesday” on October 29, 1929 everyone suddenly started to sell their stocks. Prices dropped, and thousands of people lost all they had invested. The New York Stock Exchange, the largest in the world, had its worst day of panic selling, altogether 16,419,030 shares were offered for sale. The stock market crash of 1929 was the event that started the Great Depression. But there were other causes for the depression in Canada and the stock market crash is not the only one of them.
Impact on Canadian economy
So how was Canada affected by all this? The United States was Canada’s biggest customer. It bought 40% of all goods that Canada exported, and when the many American companies went bankrupt, there were fewer customers for Canadian goods. This meant that Canadian companies had nowhere to sell their products and eventually, they went bankrupt as well. Canada relied on its natural resources to bring in money. But in the 1930’s other countries raised their tariffs higher to protect their products and the demand for Canadian goods fell and soon they began to pile up in warehouses. Wheat and other grains were also at a surplus and they had to be put into grain elevators for extended storage.
The Roaring 20’s
The 1920’s were good years for Canadians. Unemployment was very low, jobs were widely available, and people had money to spend. Since a lot of products were in demand, companies went into high production and had to borrow money from the government. Soon everyone started to buy things on credit – buy now pay later was the mantra of the day. However not everyone shared the prosperity of the 20’s. Canadian Maritimers faced hard times. After the war the factories that supplied the troops with munitions, clothing and food, shut down and many people lost their jobs. Young men and women started to move west into Quebec and Ontario to look for jobs and start a better life. Also in some parts of Canada, workers were underpaid, and could not keep up with the fast rising prices. People were blinded by their wealth and could not see the tough times ahead.
1929 Canadian Prairie Drought
The drought in 1929 was tough on the Canadian prairies. In the provinces of Alberta, Saskatchewan and Manitoba, exists an area known as the “Palliser Triangle”. This area of land was over farmed and drained of its moisture by the farmers, and when the rain failed to come in the summer of 1929, it turned into a dusty bowl of sand unsuitable for farming. To make matters worse swarms of grasshoppers invaded southern Manitoba and parts of Saskatchewan, and they ate anything that they could get their mandibles on.
Farmers lost millions of dollars, their cash incomes went down by more than $1500 per farmer. Even once wheat was harvested, selling it was another problem. In 1929 Canada produced about $218,000,000 worth of wheat. Russia, Argentina and Australia produced just as much, and they sold it for a lower price than Canada. So the prairie farmers had to lower their prices, and by doing that they eroded their profit margins, and lost a substantial amount of money.