Causes And Effects Of Black Tuesday

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.

The stock market was totally unregulated. Margin buying in particular proceeded at a feverish pace as customers borrowed up to 75 percent of the purchase price of stocks. That easy credit lured more speculators and less creditworthy investors into the stock market. The Federal Reserve board warned member banks not to lend money for stock speculation because if prices dropped, many investors would not be able to pay back their debts. No one listened.

That’s three times the amount sold on any other normal day. Over the course of the next couple of days stock prices dropped twenty-three percent. With americans spending money erratically on all these stocks, it was actually sending America into a downward spiral. Americans started buying stocks because they were starting to make more money and living the “American Dream” and owning stocks was apart of that dream. With everyone spending their money on stocks and furniture and houses and vehicles, no one ... ... middle of paper ... ...t reasons as the crash of 1929.

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.

1929 and 1939 was the deepest and longest-lasting economic decline in the history of the Western industrialized world. The Great Depression began, after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next couple years, consumer spending and investments dropped, causing steep declines in industrial output and rising levels of unemployment as failing companies lay off their workers. In 1933, when the Great Depression reached its all-time low, 13 to 15 million Americans were unemployed and almost half of the country’s banks had failed. Though the relief and reform measures put into place by President Franklin D. Roosevelt helped lessen the worst effects of the Great Depression, the economy did not fully turn around until after 1939, when World War II kicked American industry into high gear.

“The result was drastically falling output and drastically rising unemployment; ... ... middle of paper ... ...its were contracting it; The Fed's inaction was the reason why the initial recession turned into a prolonged depression; The economy continually sank throughout Hoover's entire term. Under Roosevelt's New Deal, it rose five out of seven years. Attempts to blame Big Government for the Depression do not withstand serious scrutiny; The Smoot-Hawley Tariff had a minor impact because trade formed only 6 percent of the U.S. economy, and reducing trade gave Americans only that much more money to spend domestically. Hoover's other attempts at government intervention came mostly during his last year in office, when the Depression was already at its depth; The first nations to come out of the Great Depression were Sweden, Germany, Great Britain, and then everyone else did so after they adopted the Keynesian solution of heavy deficit government spending and the Keynesian economic policies have eliminated the depression from the world's economies in the six decades that have followed. Works Cited WWW.huppi.com WWW.english.uiuc.edu Nelson Cary Kennedy, David Freedom From Fear: The American People in Depression and War Oxford, New York 1999 Oxford University Press

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.

This led to bank failures. Many people lost as much as ten times their initial investment in the crash of Black Tuesday Speculation in the 1920s caused many people to by stocks with loaned money and they used these stocks as collateral for buying more stocks. The stock market boom was very unsteady, because it was mostly borrowed money and false optimism. When investors lost confidence, the stock market collapsed, taking them along with it.People loss confidence and since they were developing mistrust of the economic situation, many wanted there money out of banks and buried in their yards. The same thing that happened to the stock market.

The following Monday the stocks dropped once again and on Tuesday a record 16,410,030 shares were sold. Not only did the stock market prices drop drastically but the business world was brought down with it. Inflation also rose because of the... ... middle of paper ... ...stock exchanges, providing much greater protection for investors. If something like The Stock market crash started again federal bureaus would step in and attempt to prevent it. However, this is of little importance since many of the causes of the 1929 crash are now illegal.

It all started on what is referred to as ‘Black Tuesday.’ October 29th, 1929 was one of the most influential days in the History of the American economy. Buying on Margin was a trend developed in the late twenties when the citizens of America could not afford to invest in stocks but yet saw a reward in buying them anyway. Due to buying on margin, 8.5 billion dollars were loaned to the American people, which was more than the amount of currency in circulation. 16 million shares were traded on Black Tuesday and the stock market completely crashed. Large corporation owners and wealthy investors tried to fix the dilemma by buying large pieces of stock but the market had officially crashed and the American people had lost 14 billion dollars in that single day and that value would only increase until November 13th when the market reached its all time low (Nishi, 2001).