The 1929 Stock Market Crash

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The 1929 Stock Market Crash "We’d like to thank you, Herbert Hoover/ For really showing us the way/ You dirty rat, you Bureaucrat, you/ Made us what we are today (www.stlyrics.com)." These lyrics from the musical Annie place the blame for the 1929 Stock Market Crash solely on the then former president Herbert Hoover. The truth of the matter is that placing the blame for the Stock Market Crash on Mr. Hoover is very unfair. Herbert Hoover was only one of many causes of the Stock Market Crash. It is easy to try to place the blame for one of the most destructive events in the history of the American economy on one person, but the real causes lie in the rampant speculation, the lack of regulation of the stock market, and the questionable ethics of many of the companies and brokers that were involved in the market. Although the 1929 Stock Market Crash is generally blamed on a few scapegoats, it was actually caused by a multitude of factors, which makes finding a scapegoat impossible. While there may be some arguments among historians, speculation is obviously one of the major causes of the Crash. Speculation (In the context of the stock market) is the buying of stocks with the purpose of profiting not from the dividends that the stock pays, but by the fluctuations in the price (Axon 31). Speculation is often looked down upon by the market as a profession, as it is seen as a form of gambling with possible serious repercussions. The secret is that speculation is actually very important in making a stock market appear healthy as it increases the amount of trading of more risky stocks, as well as increasing the overall amount of stocks that are traded on the market floor(Galbraith 16). Speculation does not become a major problem until the speculator no longer has enough capital to keep buying stocks. To get the capital, most speculators will turn to a loan. The only problem is, what will the speculator use as collateral for the loan? Using something like a house or property was far too dangerous, so the speculator would use the stock itself as collateral, in a process known as buying on margin. The process of buying on margin allows the speculator to acquire much more stock than they would normally have the money to buy.

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