The causes of the Great Depression in the early 20th century is a matter of active debate between economists. Although the popular belief is that the main cause was the crashing Stock Market in 1929 caused the Great Depression, There were other major economic events that contributed just as much as the crash, such as American’s overextension of credit, an unequal distribution of wealth, over production of goods, and a severe drop in business revenue. As these events transpired the state of economic crisis in the US began to skyrocket.
The crashing stock market became a key contributor to this crisis. With World War I coming to a close, a new generation formed in the United States. It was filled with enthusiasm, confidence, and optimism. Anything seemed possible with inventions like the airplane being developed. Prohibition renewed confidence in the productivity of the common man. It is because of this heightened optimism that people took their savings out of banks and began investing it in the stock market (Rosenburg). This confidence in the stock market caused a sudden boom.
The boom of the 1920s was based on credit meaning they used loans and money they did not physically have to invest. With the new innovations in advertisements, now being on the radio, the advertisements were pressuring citizens by advertising to buy more and more and to use credit from banks to pay for it. As more people invested in the stock market, stock prices began to rise. This was first noticeable in 1925 when stock prices bounced from high to low until 1927, when a strong upward trend began to rise stock prices dramatically (Hardcastle).
By early 1929, people across the United States were frantically looking for ways to get money to invest in the s...
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