How Did The Stock Market Crash Cause The Great Depression
The Crash of 1929
The roaring 1920s was a time where Americans were living the American dream, the age of surplus because it was the first time in American history that people could afford to buy in abundance and buy anything they pleased. The roaring 1920’s was effected by many inventions and a new life that Americans were adapting to. America enjoyed a period of great prosperity in the 1920's, people often called it ‘the roaring 20’s’ as things like mass production, cinema, jazz and prohibition were introduced, these things had a huge impact in America and many people benefited from the developments. The 1920’s also gave the American people a false sense of “permanent” prosperity too. There was an expectation that everyone as entitled to have prosperity and live …show more content…
comfortably. People were now using consumer credit, buy now and pay later and they had believed that the stock market would only go up and they were safe. They were lead to believe that there would be no more poverty. In the 1920s, there was a rapid growth in bank credit and loans. Encouraged by the strength of the economy people felt the stock market was a one way bet. Some consumers borrowed to buy shares. Buying on credit was the practice of buying shares on the margin. This meant you only had to pay 10 or 20% of the value of the shares; it meant you were borrowing 80-90% of the value of the shares. This allowed for more money to be put into shares, increasing their value.
A lot of the Stock Market crash can be blamed on false expectations.
In the years leading up to 1929, the stock market offered the potential for making huge gains in wealth. People bought shares with the expectations of making more money. As share prices rose, people started to borrow money to invest in the stock market. Another reason for the crash was a mismatch between production and consumption. There was a great increase in production line but companies were struggling to sell their products which hurt share prices. Among the other causes of the market collapse were low wages, the increase of debt, a struggling agricultural and an excess of large bank loans that could not be paid back. I think it might have been avoided if there was not this false sense of entitlement to prosperity and the overabundance of productions and credit loans for consumer goods. People were hurt mostly because they were buying stock on margin, which means they were borrowing money they didn't have to purchase the stock, and they put in orders that caused things to happen without adequate oversight. When the stock market crashed the ones who manipulated it before October 29th went broke and some committed
suicide.
The roaring 1920s was a time where Americans were living the American dream, the age of surplus because it was the first time in American history that people could afford to buy in abundance and buy anything they pleased. The roaring 1920’s was effected by many inventions and a new life that Americans were adapting to. America enjoyed a period of great prosperity in the 1920's, people often called it ‘the roaring 20’s’ as things like mass production, cinema, jazz and prohibition were introduced, these things had a huge impact in America and many people benefited from the developments. The 1920’s also gave the American people a false sense of “permanent” prosperity too. There was an expectation that everyone as entitled to have prosperity and live …show more content…
comfortably. People were now using consumer credit, buy now and pay later and they had believed that the stock market would only go up and they were safe. They were lead to believe that there would be no more poverty. In the 1920s, there was a rapid growth in bank credit and loans. Encouraged by the strength of the economy people felt the stock market was a one way bet. Some consumers borrowed to buy shares. Buying on credit was the practice of buying shares on the margin. This meant you only had to pay 10 or 20% of the value of the shares; it meant you were borrowing 80-90% of the value of the shares. This allowed for more money to be put into shares, increasing their value.
A lot of the Stock Market crash can be blamed on false expectations.
In the years leading up to 1929, the stock market offered the potential for making huge gains in wealth. People bought shares with the expectations of making more money. As share prices rose, people started to borrow money to invest in the stock market. Another reason for the crash was a mismatch between production and consumption. There was a great increase in production line but companies were struggling to sell their products which hurt share prices. Among the other causes of the market collapse were low wages, the increase of debt, a struggling agricultural and an excess of large bank loans that could not be paid back. I think it might have been avoided if there was not this false sense of entitlement to prosperity and the overabundance of productions and credit loans for consumer goods. People were hurt mostly because they were buying stock on margin, which means they were borrowing money they didn't have to purchase the stock, and they put in orders that caused things to happen without adequate oversight. When the stock market crashed the ones who manipulated it before October 29th went broke and some committed
suicide.