Causes of the Great Crash
In 1929 there had been a bull market for some time, and it seemed like it would never stop. However, such prosperity would not last forever. In October of that year, the market came to an abrupt halt. It was not a simple matter however. There was no single reason why the market finally crashed as it did but rather there were many factors that had lead to this devastating event.The first reason that had helped contribute to the stock market crash of 1929 was the huge misdistribution of wealth. The rich 5% elite was controlling the economy as well as about 25% of the nations income. Low wages, horrible working conditions and tremendous hours remained the same, as labor unions were completely ineffective during this time period. Because wages and prices weren't changing, as was the output per worker was, the rich were only getting richer. Since they were the big spenders, they basically decided which direction the economy was going.The second reason was the fact that the unstable United States economy was part of an unstable world economy. As America prospered in the 1920's, Europe struggled to rebuild itself from the devastation of the war. America throughout the 1920's, with its booming e
Through the peoples' fear and greed the stock market was very volatile. The most important reason for the crash was the fear and greed that was within the people of the period. Large companies would form Pyramids of separate holding companies and they would also form investment trusts. Many ask whether it could have been avoided. In short, this meant that they were purchasing stocks with other peoples' money. Soon that happiness would fade away, and the people would want to make just a little more. The stocks kept going up because more and more people were investing their money. In addition to that, there was a lot of corruption involved with many overseas loans such as in Latin America and Peru. The speculators would have no way to pay off their loans, and wouldn't have any hope. conomy, helped Europe by lending them millions of dollars. No longer were peoples' lives going to be worried free. For the first time, anyone could invest in the stock market. However, what was really misunderstood by the United States was that the foreign allies were in no shape to repay any loans that had been taken from the Untied States. At any little sign of trouble the people would panic and sell, driving the price of their stock way down. All that the investors had to do was put down 10 percent of their money to buy the stocks.
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