The Great Crash
The stock market crash of 1929 and the preceding depression are undoubtedly the most economically memorable events of the 20th century. Although there are many different theories as to who or what caused the crash, author John Kenneth Galbraith impressively backs up his theories through his novel The Great Crash: 1929. He points out that the five key reasons for this disaster were because of bad distribution of income, bad corporate structure, bad banking structure, questionable foreign loans, and weak economic intelligence. On December 4, 1928, in his state of the Union address, President Coolidge talked about the economic success of the country. "There was much good about the world of which Coolidge spoke... The rich were getting richer much faster than the poor were getting less poor. " According to Galbraith, there was a high employment rate as well as production. "Wages were not going up much, but prices were still stable. " People had high hopes that everything was going to get even better because of the success in the market. The Idea of getting rich quickly without having to do much rapidly caught on, causing the market to sky rocket. Often times, people would buy stock on margin
" On the contrary, nothing was farther from the truth. As Galbraith stated in the last chapter, the United States had become a creditor on international accounts. In 1927, Peru's President, Juan Leguia, negotiated a loan totaling up to $90,000,000 which later went into default due to Leguia being thrown out of office. Probably the quintessential economic moment of the 20th century, the stock market crash affected everyone. " There are a few factors leading to the depression. "From 1930 on, the budget was far out of balance, and balance, therefore meant an increase in taxes, a reduction in spending, or both. Having similar views as Fisher, Roger Babson warned of an awaiting stock market crash but was often criticized. During this time, thousands of banks continued to fail leaving people with no money and with nothing they could do about it. Warburg of the International Acceptance Bank "argued that if the present orgy of 'unrestrained speculation' were not brought promptly to a halt there would ultimately be a disastrous collapse. Because of the crash, there are measures taken to see that the stock market will never plunge to the extent that it did. In other efforts to balance the budget, President Hoover announced a tax cut. " The responses to the unavoidable effects of the market were still viewed with ignorance. The inequitable distribution of income affected the economy because the rich had what they wanted and we're not going to buy large amounts of goods. Once used to pay of loan interest to Europe, the United States used the surplus of exports over imports to in the following 10 years. Economists often tried to reassure the people that the economy was in fact "fundamentally sound.
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Acceptance Essays
