Known also as Black Tuesday, October 29th left stockholders shattered with recorded losses reaching $40 billion dollars (Kelly, n.d.). Many banks and financial institutions began collapsing which led to irretrievable, uninsured deposits and savings. Fearing further loss, people began spending less which led to a decrease in production and an increase in unemployment. As companies began to fail, the government devised the Smoot-Hawley Tariff in order to protect American businesses. The Tariff placed high taxes on imports leading to a decline in international trade.
Quincy Terrell Mrs. Stevens English III 10 December 2010 American’s Greed Leads to Poverty Republican nominee Herbert Hoover shared some hopeful words with Americans in 1928. He said that the day was in sight “when poverty will be banished from this nation.” This turned out to be was wishful thinking. One percent of the richest families in America during this time received one fourth of all U.S. income (Brinkley2). Buying stocks on margin became very popular during the 1920s. People began to abuse this system to invest huge amounts of imaginary money that only existed on paper, which back fired when the prices of stocks began to fall and they did not have money to pay for the stocks purchased (Lonkevich4).
It did not only affect Americans, but also the whole world. The Great Depression was caused by the crash of the stock market or the lack of real investment opportunities in the 1920’s, product innovation that caused less labor, President Roosevelt believed that it was caused by the structural problems and doubted simulative spending will solve the problem, and some argued it was caused by the shift toward modern employment relation that was made by the Great War. A Depression in the economy can start by raising taxes and dismissing government’s employees and both of these actions can start a depression and both of these were done by the government in 1929. Once this is done, it will have a chain reaction where it will get to the point where the economy will fall and cause its people to live in poverty. The prices of the products will either increase or stay the same but the wages of the people will always decrease.
Investors assumed causal depressions in the stock market where normal and would be followed by market growth. The stock market did increase in early 1930, but the United States hard already entered the Great Depression. The Great Depression forced American consumers to reduce their spending and forfeit on loans. This resulted in the failure of several large banks in early 1930 that further plunged the United States into financial trouble. In 1931, as consumer purchasing continued to decrease, American manufacturing also decreased and forced the failure of an even larger number of American banks.
The bull market was when prices were rising due to automobiles; steel was selling at a record high but was going down very fast. If the bull market ended when they weren’t prepared for it, then it would of left many of those investors in debt. Because other investors, which were just mostly your day-to-day average person, saw the wealthy investors selling, they decided to do the same which caused a big fall in the stocks. No matter how hard President Herbert Hoover tried to say the economy was fine, everybody continued to sell. Then finally on October 29,1929th the stock market crashed, because no one was buying and this directly led to the Great Depression.
In a lecture by Professor Newman, it was made known of the concept “selling short”, meaning, big businessmen would try to make more money on a market they knew was going down, and with that came a lot of common people losing money. When prices started to collapse over 40 billion dollars’ worth of stock value suddenly disappeared, and so did people’s money. With this caused the famous stock market crash in 1929. Almost immediately big businessmen started shutting down factories and firing employees and the demand for products went down, and with that, unemployment reached 15 million. In the lecture, Professor Newman uses the example of steel to show how much stocks declined.
Christopher Pavlat Econ- 305 11170-02 Professor Velázquez Causes of the 1929 Stock Market Crash Few economic crises match that of October 24, 1929. On that day America faced the worst stock market crash in its entire existence. Over the following month the stock market fell from its peak and spiraled toward the ground in flames. The booming New Era of the “Roaring Twenties” had seen America embrace a sense of prosperity and vast economic expansion. Consumption skyrocketed as Americans relished in the heyday of western capitalism.
p. Common Knowledge (Couldn't find a specific page, so the page is the chapter? xD) Following the end of WWI the U.S economy was turning around as the government turned laissez-faire in order for business to grow. As they grew they hired, as this happened people went out and purchased items (including new technologies that increased leisure time). As the items were purchased business grew even more and people invested in the stock market. This would soon prove disastrous as the stock market crashed, leading into the great depression.
Only six months after Hoover took office, the economy collapsed and the Great Depression began. Many factors caused and contributed to the Great Depression of 1929. One factor would be the overproductions of many goods in the 1920s led to worker layoffs Another factor was that easy credit led to people spending more than they had, and it led to a rapid inflation that eventually caused people to stop buying. The Federal Reserve Bank, created in 1913, did a poor job which also led to the great depression. It did not monitor interest rates to help regulate the economy when overproduction and inflation had started to cause unemployment in 1928-29 and the economy seemed likely headed toward collapse.
Franklin D. Roosevelt and the Success of His New Deal The American economy started weakening by the middle of the1920s. However, over investment and speculating in stocks inflated their prices that contributed to the delusion of a robust economy. Since stocks were the hottest commodity to invest in, people borrowed money and used their stocks as collateral to the banks.The Great Depression was considered started on Black Thursday October 24th, 1929 when the New York Stock Exchange collapsed in the greatest market crash with the Dow closed at 316.38, and the plunge continued until the Dow reached its low of 41.22 in 1932. When the stocks values dropped, people were not able to pay for their debts while the banks just held worthless collaterals. Many banks declared bankruptcies because they could not get back their money from stock investors.