The Cause of the Crash of 1929
One of the biggest financial fears Americans have is that there will someday be another stock market crash that is severe enough to set off another Great Depression. While the current financial picture of the US is much more stable because of measures put in place following the crash of 1929 there is still a nagging worry in the minds of most Americans. One of the things that experts have tried to do since the crash of 1929, is determine what caused it to happen. If American financial institutions and experts can understand what lead to the crash it will be more possible to prevent one of that magnitude ever happening again. One of the most common misunderstanding with regard to the crash of 1929 is that it was sudden and without warning(Tishler, 2004). To hear people tell it today, it occurred between the morning and evening hours of one day and there was no advance warning whatsoever. While this makes for a dramatic story, and fuels the fear it could happen again, it simply is not true. There were many signals that it might happen, signals that were largely ignored and because they were ignored the market came tumbling down. When the crash occurred it actually enveloped two significant events.
In addition banks and other financial institutions had been promoting a relatively easy money policy. One was Black Thursday and the other was Black Tuesday. The sale of goods and the building of new factories was on the decline while Americans were still happily buying up stocks that had an over inflated value. Many sellers did not know what prices they had received for their trades until later that nigh(Lopus, 2005)t. us/academics/history/Stoneking/chapters/us/us21. The nation had been lulled into a confidence in the market where individuals seemed to forget that the stock market is actually a calculated gamble and one that requires financial savvy and some ability to financially ride out the downward trends that had happened throughout the history of the market(Schultz, 2004). In anticipation of eventually selling the surplus, business leaders funneled their profits right back into industry(Schultz, 2004). The people had elected Herbert Hoover as president and the general mood of society during that time was of hope and promise. Articles were published in magazines with titles such as "Everybody Should Be Rich" denoting the ease with which people were profiting from their stock investments(Schultz, 2004). "Companies invested their over-production profits in new production. This investment strategy turned the stock market into a speculative pyramid game, in which most of the money invested in the market didn't actually exist(Schultz, 2004). "Black Tuesday" was the single most devastating financial day in the history of the New York Stock Exchange(Schultz, 2004). This happened in the months leading to the crash of 1929 when Americans believed their luck would never end and that they had joined the ranks of those "in the know" when it came to stock investments.
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