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Introduction to the 1929 Wall Street Stock Crash of the U.S
Introduction to the 1929 Wall Street Stock Crash of the U.S
Factors that led to the stock market crash
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The Stock Crash It was 1929, and in the United States things could not be better for those smart enough, or for that matter, brave enough, to gamble on the Stock Market. All of the big stocks were paying off handsomely, the little ones too. However, as much as analysis tried to tell the people that this period of great wealth would last, no one could imagine what would come of the United States economy in the next decade. The reasons for this catastrophic event in American 20th century history are numerous, and in his book, The Great Crash, John Kenneth Galbraith covers the period and events which lead up to the downward spiral in the fall of 1929 and the people behind the scenes on Wall Street who helped this fire spread. One thing is for certain, no one single reason can be given for the stock market crash. There are however smaller causes and much larger causes which can be attributed to this down period in the economy. Galbraith lists in his book five of the main reasons, or as he puts it, weaknesses, which lead to the disaster. The first one he believes is to blame is the bad distribution of income. In 1929, five percent of the American population held the wealth. This meant that in the that year, this high income bracket received 1/3 of all the personal income. This translates into a lack of American spending, and as Galbraith puts it, " the rich cannot buy great quantities of bread" Most spending was done by the lower classes, even though they made far less money. The second reason Galbraith lists was the bad corporate structure. During this period, the weaknesses could be found in the new holding companies and investment trusts. Trusts such as the one ran by Harrison Williamson and the American Founders Gro... ... middle of paper ... ...ich contributed to the fall was the refusal on October 11, 1929 of the Massachusetts Department of Public Utilities to allow Boston Edison to split its stock four to one and went as far to say that no one would buy the stock anyway. This was a negative blow to the companies in general and to deny them the split was unprecedented. The Crash of 29 was clearly brought on by numerous factors, however, had there been a fundamentally sound economy in place at the time of the crash, the country may have been able to pull through it. This was not the case of course and for the next several years, people in the United States experienced something which not even the Harvard Economic Society could predict ( try as they might) and because of this great event in American history, the people who restrained from jumping off those New York city high rises, were stronger for it.