Causes Of The Economic Crash Of 1929 Essay

Every action has an equal and opposite reaction. Whether the initial action results in a positive or negative reaction, it is in the hands of those who make the decision. Take for example the economic crash of 1929. There are many leading factors which led to the economic crash, such as buying on margin, overproduction, and speculation in the stock market. During the 1920s many investors began to purchase stock on a certain type of credit. Therefore, buying stock on credit is known as buying on margin. By buying on margin, investors were responsible for paying a part of the stock with the intention of selling the stock when the price would rise. However, if the price of the stock fails to rise and instead it decreases, the buyer has to settle the cost of the purchase (this is known as margin call). As more and more investors continued to purchase stock on margin it led to the stock market to become unstable because as more stock was purchased, the less value it possessed. As result of the investors continuing to buy stock on margin and the stock losing value, it further pushed toward the economic crash of 1929. Moreover, overproduction was at its ultimate high during the 1920s. Consumer spending and business
Investors grew nervous about the economy for many reasons. Some of theses reasons include: consumer demand had slowed, manufacturers were overproducing goods, consumers were purchasing goods they could not afford, and bank failures had become more common, as a result investors began to question the pieces in the stock market. In October of 1929, the stock market crashed and stock traders panicked about the future of the economy. Many stock traders rushed to see shares of companies’ stocks, and as prices fell more and more investors sold their stocks. However, when the the slide ended, the stock market had already lost eighty-nine percent of its