American Economy Collapse and the Wall Street Crash

The Stock Market crash happened on October 29, 1929 and the Great Depression started in 1929 and ended in 1939. In the end of September and the beginning of October stock prices began to decrease. The crash was caused by the nervous investors which sold 16.9 million stocks on the New York Stock Exchange in one day. Many businesses invest most of their money in the stock market to make more money, but when the stock market crashed, so then businesses had to shut down because they have no money. Most of the nation’s banks also failed because they had to put the depositors money in the stock market to increase but when it crashed people lost most of their money.

Speculators who borrowed money from the banks to buy their stocks could not repay the loans because they could not sell stocks. This caused many banks to fail. Since bank deposits were uninsured before the 1930s depositors' their money, which in many cases was all that many people had. The stock market crash intensified the course of the Great Depression in many ways. Besides wiping out the savings of thousands, it hurt commercial banks that had invested heavily in corporate stocks.

They had purchased stock in companies whose shares were now crumbling in value” (Ayers 678). After the stocks crashed, people who were invested in them, lost thousands even millions of dollars. The banks were the top investors so they lost the most amount of money with their invested stocks, along with the frightened depositors withdrawing their savings, draining money quickly from the bank. Hundreds of banks failed and shut down because of their loses. CLOSING STATEMENT: although, … Businesses were also affected by the Stock Market Crash.

All of the margin buyers would be wiped out quickly. The whole market in 1929 compounded the leverage idea as "investment trust" proliferated. The investment trust existed for the sole purpose of owing stock.... ... middle of paper ... ...lack Tuesday an unprecedented 16.4 million shares changed hands. Stocks fell so much, that at many times during the day no buyers were available at any price (McElvaine 48). This speculation and the resulting stock market crashes acted as a trigger to the already unstable U.S. economy.

The stock market caused this depression because of something called “buying on margin.” Buying on margin was a phenomenon that occurred in the Twenties where people would borrow money from brokers to buy stocks. This brought record numbers of people into the market, and created a price bubble. When the bubble popped, the brokers wanted their money back, and people were forced to sell their property and cash in their life savings to pay the brokers back. These people were barely able to make ends meet, and could no longer afford the luxuries of the Twenties. Because so many people had bought on margin, the economy suffered from a severe lack of activity, creating a nationwide depression.

The new deal was necessary because in October 1929 the stock market in America had fallen deeply. This caused the American economy to collapse. The Wall Street crash occurred because share dealers thought that the stock market could not rise forever. So some of the rich stock holders sold there shares thinking that the prices were at its highest. Many other stock holders were worried and more and more people started to sell.

Another factor was the maldistribution of wealth. Consumer demand decreased, and a stable market could not be created. In 1929 although the economy grew, many Americans could not afford to buy merchandises industries were producing. A third factor was that the economy’s credit structure was horrible. Farmer’s crop prices were low and they could not pay off their debt.

Even though it first happened in America, other parts of world were also involved such as Australia, Canada, China, France, and Germany etc. During the Great Depression, the number of people unemployed increased, causing a lot of people to be jobless. Personal income, tax revenue were greatly affected. Many people thought that the cause of the Great Depression was started by the stock market crash on October 29, 1929. Truth is, it was a misconception.

Many had unknowingly lost all of their money. To add insult to injury, many brokers even called in loans, forcing some to use their entire life savings on to pay them off. Upon seeing the news, some investors jumped out of windows because they had lost all hope of recovery. As for everyone else, they yelled, roared, fell to the floor; the police were called into the stock exchange to keep control. By the end of the day, Dow closed at 212.33, 16.4 million stocks had been traded, and a total of $14 Billion dollars were lost, 185 billion in today 's money.

Although this day is considered the trigger to the massive economic fallout, the American and global economies had been in turmoil for six months prior to Black Tuesday, and many other factors contributed to what’s known as the worst economic crash in modern history. With few regulations on the stock market in the years leading up to the Great Depression, investors were able to buy stocks on margin, only requiring them to put down ten percent. This caused for wild speculation, and many people funneling their life savings into the stock market, which led to artificially high prices. After Black Tuesday, many people began to believe that the banking system in America was going to fail. Thousands flocked to the banks to withdraw their money.