How Did The Stock Market Crash Contribute To The Great Depression

On October 29, 1929, the stock market crashed. Not only did millions of investors lose their money but banks lost all of the money they had invested that their customers had given to them. To make the problem worse is that the people who had remaining money in the banks tried

The stock market crash of 1929, additionally called the Great Crash, was a sharp decrease in U.S. stock exchange values in 1929 that added to the Great Depression of the 1930s. The market accident was a consequence of various economic imbalances and structural failings (Pettinger). In the 1920s, there was a fast development in bank credit and advances. Energized by the quality of the economy, individuals felt the share

In late October of 1929, the U.S. stock market crashed, setting our nation into the Great Depression. In an attempt to reveal the true catalysts of the event, the book “Causes of the 1929 Stock Market Crash” examines popular beliefs of what really caused the economic tragedy. The nine questionable causes that are discussed in this book are that the stock market was too high in September of 1929 due to “excessive speculation” (Bierman 32), there was a downturn in business activity, the Hatry affair, the Federal Reserve Board’s actions, a message that there was a “war” against speculators, excessive buying on margin and of investment stocks, excessive leverage in terms of debt, a competitively priced utility market segment paired with a setback in the public utility market, and an overreaction by the stock market.

Over the 1920's, many American's wealth increased substantially. This caused many to look to find a place to invest their new found earnings in something that felt safe from inflation. Many people felt that the stock market was a safe one way bet, causing customers to buy shares by taking out loans from banks, but in 1929 everything changed. After reaching its peak earlier that year, on October 29, 1929, what they call “Black Tuesday” hit Wall Street causing investors to trade over 16 million shares on just the New York Stock Exchange in a single day. Billions of dollars vanished, wiping out thousands of investors. Most people believe that the Stock Market crash can be blamed on over eagerness and false expectations. In the years leading up to 1929, the stock market held, what the consumers thought, to be the next gold rush. People bought shares with the expectations of making more money. As share prices rose, people started to borrow money to invest in the stock market. The aftermath of the crash put into motion, what is called the darkest time, economically, in American history the Great

In the Roaring Twenties, people were trying to get rich and have fun. A lot of people poured their money in stock markets, but it backfired. The stocks crashed; this began the Great Depression. This was the worst depression we’ve had yet, it affected more people from higher class to lower class. A depression is a time of decline in business activity accompanied by falling prices and high unemployment. The start of the Depression is usually pegged to the stock market crash of “Black Tuesday,” Oct. 29, 1929, when the Dow Jones Industrial Average fell almost 23 percent and the market lost between $8 billion and $9 billion in value. But it was just one in a series of losses during a time of extreme market volatility that exposed those who had bought stocks “on margin” — with borrowed money.

Imagine that you received a huge bonus from your occupation that compensates almost $50,000 a year. You go to your bank to cash your paycheck, only to have the bank clerk disclose that they do not have your money. The financial institution went belly up, losing all the money within it because of external sources. This paper discusses the reason behind the Great Depression and distinct policies generated to mend the American financial system that began when the stock market crashed October 29, 1929.

“In 1928 and 1929 the Federal Reserve System raised interest rates in an effort to slow the market speculation” which led to a reduction of spending (Mitchener, 2011). The share prices began to drop rapidly which left many people uneasy about their stocks and on October 29, 1929 nervous shareholders sold 16,410,030 shares causing the stock market crashed. The estimated loss of around forty billion dollars left the United States in a state of panic. Millions of Americans had invested both small and lager sums of money into stock. The fortunes of the wealthy were destroyed and the savings of the average American were lost. America’s prosperity of the 1920’s had come to an abrupt halt. Millions had lost so much money that banks began to fail taking people’s savings with them, forcing factories to close, and bankruptcies swept the nation. “By 1932, U.S. manufacturing output had fallen to 54 percent of its 1929 level, and unemployment had risen to between 12 and 15 million workers” (Nelson). The Great Depression was now gripping the nation.

The stock market crash was only the beginning for America. “Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and rising levels of unemployment as failing companies laid off workers” (“The Great Depression”). By 1931, over 6 million Americans were left unemployed (“The Great Depression”). Thousands of banks were shut down by 1933 due to many investors demanding cash deposits and forcing banks to liquidate loans (“The Great Depression”). “Banks, which typically hold only a fraction of deposits as cash reserves, must liquidate loans in order to raise the required cash. This process of hasty liquidation can cause even a previously solvent bank to fail” (“Great Depression”).

On Tuesday, October 24, 1929, the United States stock market experienced the single most catastrophic crash in its history. This date would come to be known as “Black Tuesday”. Before Black Tuesday, America was experiencing one of the single greatest economic eras of prosperity. So much so, that it was known as the “Roaring 20’s”. During this time the amount of American wealth tripled, with mo re money going to the top 10% of people and the bottom 90% being left behind. There were more and more people buying company stock, but there was not enough people selling stock, which led to massive amounts of price inflation. This inflation led to the stagnation of various industries, such as, agricultural and manufacturing. When stockholders realized that the companies that they were investing in were not worth the stock they purchased them for there was a major sell out, which led to the bankruptcy of banking, agricultural, and manufacturing

In 1929, the stock market crashed. Many people began to sell all their stocks because they were afraid the stock value was going to decrease. When people bought stocks in the 20s, they bought on margin. This means that they paid for part of the price stock. They borrowed money from stockbrokers to pay for the other part of the stock. This part was called the margin. Many people lost money, and the Great Depression had started. The dust storms in the Midwest destroyed large quantities of crops and left many families desolated. Some farmers lost so much money they could not pay the mortgage on their farm and were forced to rent their land or move. By 1933, the average American had $1/day to live on. Railroads went bankrupt. Most apartment building

The stock market crash of 1929 was one of the worst events in U.S. history. This topic was chosen to show the affects of the stock market crash. Even though the U.S. was not able to trade or sell, the stock market crash was highly effective because, their was a lost of jobs, shops were going out of business, banks lost money. This information shows the stock market crash of 1929 to be a major impact on

Extensive stock market speculation that took place during the latter part that same decade made the economy unstable. In 1925 the market value was $27 billion and by 1929 the market value had grew to $87 billion (5). New investors entering the market, many who viewed it as a get rich quick scheme, and lenders willing to loan them money helped inflate stock prices. Before the Great Depression, there were no effective legal guidelines on buying and selling stock. Free from such limitations, corporations began printing up more and more common stock to sell to make a profit . Many investors in the stock market practiced "buying on margin," that is, buying stock on credit (1). Confident that a given stock's value would rise, an investor put a down payment on the stock, expecting in a few months to pay off the balance of their initial investment while reaping a hefty profit. This investment strategy turned the stock market into a speculative pyramid game, in which most of the money invested in the market didn't actually exist. By 1928 the economy began to slow down, there were production surpluses and a downturn in business activity. The Federal reserve board took notice and hiked interest rates in an attempt to slow investors. They wanted to slow the investments to a pace more appropriate to the economic decline.

In the 1920s, there was an increase in bank credit and loans. Confident in the potency of the U.S. economy, the stock market became a one way bet. Many consumers borrowed money to buy shares. Firms took out more loans for expansion. Because people took on so much debt, it meant they became more vulnerable to a change in confidence. When that change came in the form of the 1929 crash, those who had borrowed money were left exposed. Moreover, rush to sell shares trying to remedy their debts.

In 1929 the stock market crashed, triggering the worst depression ever in U.S. history, which lasted for about a decade. During the 1920s, the unequal distribution of wealth and the stock market speculation combined to create an unstable economy by the end of the decade. The unequal distribution of the wealth had several outlets. Money was distributed between industry and agriculture within the U.S.; in social classes, between the rich and middle class; and lastly in world markets, between America and Europe. Due to the imbalance of the wealth, the economy became very unstable. The stock market crashed because of the excessive speculation in the 1920’s, which made the stock market artificially high (Galbraith 175). The poor

As agonizing as the stock market crash was, at the time, people thought that this recession would not last long (Rauchway 30). To exacerbate the situation, in 1930, two significant events occurred, the first was the passage of the Smoot-Hawley Tariff, which practically halted global consumption, and second, was the spread of a severe drought in the Great Plains that scorched the farming sector (Himmelberg 9). The afflictions of the farmers inundated the banking sector, and with the dwindling economy, thousands of banks collapsed (Himmelberg 10). Some of these bank closures were results from "bank runs", in which savings were withdrawn by crowds of depositors, due to fear and panic (Himmelberg 10). When one of New York City's major banks,