October 29th, 1929 marked the beginning of the Great Depression, a depression that forever changed the United States of America. The Stock Market collapse was unavoidable considering the lavish life style of the 1920’s. Some of the ominous signs leading up to the crash was that there was a high unemployment rate, automobile sales were down, and many farms were failing. Consumerism played a key role in the Stock Market Crash of 1929 because Americans speculated on the stocks hoping they would grow in their favor. They would invest in these stocks at a low rate which gave them a false sense of wealth causing them to invest in even more stocks at the same low rate.
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.
There was absolute chaos when people heard that the stock market had crashed, which led to bank runs. People did not trust banks anymore and wanted to get their money so they could make sure their money was in safe hands. When one of the first bank runs occurred in Nashville, Tennessee, this kick started a movement of bank runs. The banks only carried a portion of the depositor’s money and would provide the rest to borrowers. So when people came to the banks for their money, the banks did not have all of it.
Because so many people had bought on margin, the economy suffered from a severe lack of activity, creating a nationwide depression. People also lost their savings, as a result of banks using deposits to buy stocks. Other causes of the crash include over-speculation and overreaction. Over-speculation, the act of valuing
(Scaliger egot Americans defaulted because of the lack of money being circulated. Deflation was a huge factor that drove America into the Great Depression. There were many factors that caused the Great Depression from the banks creating IOU’s to deflation. This economic crash was due to the capitalist system of the United States Federal Reserve on top of the many band-aids that were implemented. Before the 1920’s, the average worker could not borrow money.
The Federal Reserve Bank may have helped with the disaster of economic depression as it has inflated money supply during 1920’s. Then after the Federal Reserve was aware it warned its member banks not to lend money for speculative purposes. The stock market crashes Stock shares began to be sold in large quantities; everyone wanted to sell their stocks. People were desperate to sell their stock all over the country. A group on bankers gathered together and after the short meeting they had, they announced they are going to buy the stock shares on the market.
This plan was established because many Americans didn't have enough money to buy goods and services that were needed or wanted. The installment plan stated that people could buy products on credit and make monthly payments. The one major problem with this idea was that people soon found out that they couldn't afford to make the monthly payment(Drewry and O'connor 559). In 1929 the stock market crashed. Many Americans purchased stocks because they were certain of the economy.
Big banks were in trouble as well, many investing recklessly in the stock market then losing it all when the stock market crashed in 1929. The fourth factor was Americas position in the international trade market. In the late 20's, Europe's demand for American goods began to decline, partly because their industry was becoming more productive and partially because their economy was destabilized from the international debt structure that emerged in the aftermath of WW1. The international debt structure was a fifth and final factor contributing to the Great Depression. At the end of the war in 1918, all the European nations that had been allied with the US owed large sums of money to American banks and could not repay them with their shattered economies.
Fearing that banks would close, customers lined up to withdraw their money. Since banks rarely keep enough cash on hand to pay all their customers at once, many banks shut down. The Great Depression was the time of great economic hardship, had begun. As banks failed or cut back on loans to businesses, factories produced fewer goods and there... ... middle of paper ... ... not return until United States entered World War II in 1941. After World War I, the price of food began to drop causing some dramatic effects on the United States economy.
When it crashed, they could not pay back the loans and the banks lost money. The market misled the banks as they thought loaning traders money would be very lucrative. The Federal Reserve was a cause of the 1929 stock market crash because it essentially owned the government and fueled the speculation.