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economic causes and impacts of the stock market crash of 1929
economic causes and impacts of the stock market crash of 1929
economic causes and impacts of the stock market crash of 1929
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Research Paper: Roaring Twenties
After World War 1, America had to demobilize and revert back to a peace time economy. During the 1920’s, it was viewed as a prosperous economy since there was a new labor force due to demobilization, new inventions, and a new infrastructure. Also moral spirits were high since America along with the Allied Powers defeated Germany and the Great War was finally over. However, America began making many economic policies and decisions that will eventually lead up to the Great Depression.
One economic policy was that “the Federal Reserve had raised interest rates in hopes of slowing the rapid rise in stock prices” (Romer, 3). At the time the “stock prices had risen more than fourfold from the low of 1920” (3). With the raised interest rates, this would slow down the economy, but more specifically in the construction and automobile areas because they are “interest sensitive” (3). This would slow down the constructions especially in the construction of the new infrastructure. Also there was a boom in housing in the early 1920’s that led to a surplus of houses, causing the housing sales to decrease. With this, less construction was needed, therefore shrinking the labor force and slowing down the economy. Production would also decrease for the automobile industry because it was an interest sensitive industry. Therefore, jobs vanished from the two industries causing the economy to stagnate. All of this was because of the raised interest rates from the Federal Reserve causing a chain reaction that would slow down the economy leading it into the Great Depression.
Another policy that the government incorporated was the creation of a new infrastructure. The government became involved with the new infrast...
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Metzer, Jacob. "How New Was the New Era? The Public Sector in the 1920s." Journal of Economic History. 45.1 (1985): 119-126.
Romer, Christina D. "Great Depression." N.p., 20/12/2003. Web. 31 May 2010. .
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The symptoms of the Great Depression began since the World War I and the economic boom of the 1920s, which was built on a shaky foundation. As a result, the Great Depression remained inevitable due to poor economic diversification, uneven distribution of wealth and poor international debt structure. However, although the Depression shook much of American society and culture, the capitalist system survived, the American people remained receptive and the belief in the "American way of life" didn't falter throughout the long years of economic
In the Roaring Twenties, people started buying household materials and stocks that they could not pay for in credit. Farmers, textile workers, and miners all got low wages. In 1929, the stock market crashed. All of these events started the Great Depression. During the beginning of the Great Depression, 9000 banks were closed, ending nine million savings accounts. This lead to the closing of eighty-six thousand businesses, a European depression, an overproduction of food, and a lowering of prices. It also led to more people going hungry, more homeless people, and much lower job wages. There was a 28% increase in the amount of homeless people from 1929 to 1933. And in the midst of the beginning of the Great Depression, President Hoover did nothing to improve the condition of the nation. In 1932, people decided that America needed a change. For the first time in twelve years, they elected a democratic president, President Franklin D. Roosevelt. Immediately he began to work on fixing the American economy. He closed all banks and began a series of laws called the New Laws. L...
Scheiber, H., H. Vatter, and H. Underwood Faulkner. American Economic History. New York : Harper &
The Great Depression of 1929 to 1940 began and centered in the United States, but spread quickly throughout the industrial world. The economic catastrophe and its impact defied the description of the grim words that described the Great Depression. This was a severe blow to the United States economy. President Roosevelt’s New Deal is what helped reshape the economy and even the structure of the United States. The programs that the New Deal had helped employ and gave financial security to several Americans. The New Deals programs would prove to be effective and beneficial to the American society.
The 1920s were a time of leisure and carelessness. The Great War had ended in 1918 and everyone was eager to return to some semblance of normalcy. The end of the war and the horrors and atrocities that it resulted in now faced millions of people. Easily obtainable credit and rapidly rising stock prices prompted many to invest, resulting in big payoffs and newfound wealth for many. However, overproduction and inflated stock prices increased by corrupt industrialists culminat...
The 1920s was a time of conservatism and it was a time of great social change. From the world of fashion to the world of politics, forces clashed to produce the most explosive decade of the century. It was the age of prohibition, it was the age of prosperity, and it was the age of downfall.
Lindop, Edmund, and Margaret J. Goldstein. America In The 1920s. Minneapolis: Lerner Publishing Group Inc., 2010. Print.
The rapid economic expansion and changing social attitudes both contributed to the growing sense of confidence shown in the 1920’s. Due to new ideas and better working conditions, the economy was booming. More people were able to afford goods due to the fact that they could be produced in greater numbers allowing the prices to decrease. This led to significant increases in the sales of products such as cars, refrigerators, radios and cookers. A man by the name of John R. Lee mentioned that companies successfully lowered the prices of the convenient car in order to make it affordable for more people to purchase their products. Also, there were plenty of jobs with better working conditions than before the war that allowed people to step into the middle class (D). Hoover also stated that to keep the economy going, the companies would have to maintain their moral values and treat the workers well, but the workers should not try to ask for too much. The balance that he spoke of was se...
...e excessive speculation in the late 1920's kept the stock market artificially high, but inevitably led to the big crash. Overproduction may have seemed like a good idea but in the long really hurt the U.S. as the farm industry fell, workers fired, and purchasing levels across the country were at all time lows. These speculators combined with the overproduction and the maldistribution of wealth, caused the American economy to crash. Today, our government still argues over who should have the nation’s wealth and even if the wealthier should pay higher taxes then the less wealthy. Some could argue that the government should of utilized laissez faire and kept there hands off of the people’s business and let the people work things out on there own. Either way, the country did a very good job of making changes and not letting anything get as worse as it was in the 1920’s.
Between 1870 and 1900 (The Gilded Age), the economy had a major boom. The United States went from “Lincoln’s America- a world centered on the small farm and artisan workshop- to a mature industrial society.” By 1913, America produced about one- third of the world’s industrial productivity. With the new upgrades, like the railroad and the industrial companies the economy was flourishing with the growing supply of labor, immigrants. The new industrial economy came with a price. The politics was ill equipped to handle the problems that came with the rapid growth of the economy. The Democrats were not for high tariff but the party remained closely linked to New York bankers and having nothing to do with the debt-ridden agricultural areas. While on the other hand, the Republicans favored the eastern industrialist and bankers also putting the farmer in the Southwest at a disadvantage.
The 1920s were known as carefree and relaxed. The decade after the war was one of improvement for many Americans. Industries were still standing in America; they were actually richer and more powerful than before World War I. So what was so different in the 1930’s? The Great Depression replaced those carefree years into ones of turmoil and despair.
The stock market crash of 1929 is the primary event that led to the collapse of stability in the nation and ultimately paved the road to the Great Depression. The crash was a wide range of causes that varied throughout the prosperous times of the 1920’s. There were consumers buying on margin, too much faith in businesses and government, and most felt there were large expansions in the stock market. Because of all these...
Wukovits, John F., ed. America's Decades: The 1920's. San Diego: Greehaven Press Inc., 2000. Print.
In the years preceding the stock market crash of 1929, the condition of America’s economy wasn’t anywhere near ideal, but it certainly was not at its worst either—not yet. Also known as “the Roaring Twenties,” this period before the crash brought with it an extreme over dependency on factories and production, especially because the automobile industry exploded in popularity among the opulent class. Also, the distinction between rich and poor was amplified. Poverty was common among 60% of the population, whil...
The roaring twenties saw a great deal of prosperity in the United States economy. Everything seemed to be going well as stock prices continued to rise at incredible rates and everyone in the market was becoming rich. Two new industries: the automotive industry, and the radio industry were the driving forces of this economic boom. These industries were helping to create a new type of market that no one had ever seen in history. With the market continuously increasing and with no foreseeable end, many individuals were entering the market because they saw the market as a sure fire way to get rich quickly. The rising prices of stocks and the large increases in trading created the speculative market that would eventually crash. On Monday, October 28, 1929, New York seemed to be the primary focus of the entire world. During that week in October, the bottom of the New York stock market fell out, an event that would lead the world into the greatest depression it has ever seen to date. Many individuals including those in the Federal Reserve Board saw the crash as a healthy thing that would bring all speculative trading to an end, and bring stock prices down to “realistic” levels. Following the crash the Fed followed a contractionary policy, which does not encourage expansion. Although that type of policy did need to be implemented prior to the crash, the decision to implement contractionary policy after the crash at best can be considered a questionable decision. The unstable financial situation of the United States that lead to the great crash can be attributed to the lack of leadership and action of the Federal Reserve in the financial world during the roaring twenties.