American Economy Collapse and the Wall Street Crash

Satisfactory Essays
American Economy Collapse and the Wall Street Crash The economic boom of the 1920s came to an end in October 1929. The boom got totally out of control by 1929 with the average price of shares increasing by 300%. People would buy on the margin, and then waiting for the prices to go up before selling to make a profit. By the summer of 1929 there were 20 million shareholders in America and the prices continued to rise. Until October of that year when people realised that the prices had risen too much and were about to fall, so people began a drastic sell. This resulted in the Crash. The immediate consequences of the crash were the massive unemployment. By 1932 there were 13 million people unemployed. Banks lacked the right amount of cash as a reserve and were giving out loans much too easily. Banks had invested a lot of their customer's money into the share market and lost millions of dollars. Banks called in outstanding loans from customers. People filled the street's cueing to get into banks to withdraw all their savings before they lost them all, because everyone had lost confidence in the banks. Banks went bankrupt in 1929 with 659 and 2294 by 1931. By 1933 4000 banks had collapsed. With their loans called in many companies also went bankrupt between 1929 and 1932, 109,371 businesses failed. Everyone was over-confident that the boom would go on and that demand would continue to rise. It did not. By early 1929, several things began to cut down demand. America's population growth was slowing down and fewer goods were needed. Foreign countries put high tariffs on American imports, responding to the American government's similar policy. So the goods been produced were not been distributed to other countries because they could not afford them either. The fall in demand of the products was a result of the poor income distribution. Too much of the income from the 1920s boom was going into too few hands. By 1929, 5% of the American population was
Get Access