Causes And Effects Of The Wall Street Crash

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The Wall Street crash, also known as Black Tuesday,happened on October 24th in 1929.This day was to be remembered as the most devastating stock market crash in the history of the United States and one of the most important economic events ever. The crash has been researched globally by economists and has increased the understanding of risks in economy and stock market. In this essay, we will look at the stock market at the time, as well as causes and effects of the crash.

A fundamental factor of the crash was the overheating of the economy and economic bubble created by the overpriced stocks that followed. From 1921 onwards, the stock market was doing very well and businesses were hitting profit records. () This caused stocks to become valuable
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Historians still debate over this matter, for example The Economist wrote in an article 1998 that the Depression did not start with the stock market crash. Nor that it was clear at the time of the crash that a depression was starting. According to Milton Friedman, what finally plunged the country into the Great Depression was the collapse of the banking system, caused by the unpaid loans taken by speculators. According to this theory the great depression was the aftermath of a chain reaction that started by inexperienced investors. The banks loaned money to speculators as well as invested in the stock market themselves. When the stock market crashed the speculators couldn't pay back their loans and banks went out of business, causing many people with money in the banks to lose their…show more content…
The crash was a very harsh time not only for the people who had been involved in the stock market. When the stock market fell and the banks wanted the loaned money back the speculators were struggling to scrape up enough to pay, but also ordinary people lost all they owned. Many investors who had gotten rich by shares lost everything. Statistics show that there was a spike in suicides in the years 1929-1930, a sign of many people being desperate as their household economy was ruined by debts to the banks. The Wall Street crash is still very relevant as it shows how greatly the people not even involved in the stock market are affected by it. A long term effect was that americans lost faith in the stock market. The general attitude towards buying shares was negative. In July after the crash the stock market index Dow had fallen by 90% from its highest in september 1929. No confidence in the market resulted in an unhealthy economy and it took 25 years for the stock market to recover.

As explained above the Wall street crash has had major impacts of the US and world economy. It has been the subject of academic debate economically, historically, and politically from when it happened to present day. It is important to study the wall street crash as it will increase our understanding of the risks of the stock market
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