How Did The Stock Market Crash In The 1930s
The main point on this video is what factors contributed to the stock market crash to start the Great Depression in the 1930s. Because there was no regulation or government involvement in the stock markets at the time, corruption ran ramped. In the 1920s and 30s it was not considered corruption because there no laws against insider trading as there are today. The stock markets were manipulated to drive the cost of shares and stock up through the illusion that the market was strong and everyone was getting rich. The illusion continued by corruption in the media, who published positive articles about certain stock that inflated its prices that were sold to unsuspecting public. Once the pool of manipulators figured the stock to be at a peak they would sell off their stocks that they had purchased for a fraction of the current market value and split the profits making million of dollars.
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This was a time that the public was very gullible and easy persuaded.
The public watched prominent figures get richer and richer and decided they to could do the same, they also believed any public figure’s word about the status of the market and acted accordingly to them. They believed prediction with no hard data to substantiate the claims of these Mayors, astrologers, and bankers. So many people thought that nothing could go bad, all was grand so they invested all they had. When the publics money ran out, debt was create called “buying on margin.” This meant they only needed ten percent down to buy stocks. A ten percent payment of $1000 would get you $10,000 worth of stock that you were in debt for. So many Americans were living the dream of getting rich fast and never recognizing the fact that at some point the dream would not
last.
When the stock market began its fall, it was a tumbling act that could not be stopped. Investors started to realize they could potentially lose everything they had and most did. Investors went from rich status to penniless overnight. When the public had no money to purchase necessities or living needs the economy tanked leaving the country in an economic downward spiral. The world was experiencing a recession at the same time that contributed to the lack of demands on United States products and services. The lack of demands from the rest of the world led to unemployment rates at 25%.
Government involvement may have helped avoid the depression by setting regulation and laws. These laws today are known as “inside trader” laws. “Insider trading is the trading of a company’s stocks or other securities by individuals with access to confidential or non-public information about the company. Taking advantage of this privileged access is considered a breach of the individual’s fiduciary duty” (Legal Information Institute 2018). These laws are as important as price ceilings and floors that our government regulates today. Some examples of these are rental controls and minimum wages. Another is limits put on goods after a natural disaster that deters anyone from inflating prices for profit during shortages of products. The minimum wage control works to stabilize the economy and hold inflation in check (Grimes and Register 2016, 65). The second reason for government to set levels is to keep the purchase of certain items within reach of those at the lower end if the income scale (Grimes and Register 2016, 65-66). This was not in place during the Great Depression.
This was a time that the public was very gullible and easy persuaded.
The public watched prominent figures get richer and richer and decided they to could do the same, they also believed any public figure’s word about the status of the market and acted accordingly to them. They believed prediction with no hard data to substantiate the claims of these Mayors, astrologers, and bankers. So many people thought that nothing could go bad, all was grand so they invested all they had. When the publics money ran out, debt was create called “buying on margin.” This meant they only needed ten percent down to buy stocks. A ten percent payment of $1000 would get you $10,000 worth of stock that you were in debt for. So many Americans were living the dream of getting rich fast and never recognizing the fact that at some point the dream would not
last.
When the stock market began its fall, it was a tumbling act that could not be stopped. Investors started to realize they could potentially lose everything they had and most did. Investors went from rich status to penniless overnight. When the public had no money to purchase necessities or living needs the economy tanked leaving the country in an economic downward spiral. The world was experiencing a recession at the same time that contributed to the lack of demands on United States products and services. The lack of demands from the rest of the world led to unemployment rates at 25%.
Government involvement may have helped avoid the depression by setting regulation and laws. These laws today are known as “inside trader” laws. “Insider trading is the trading of a company’s stocks or other securities by individuals with access to confidential or non-public information about the company. Taking advantage of this privileged access is considered a breach of the individual’s fiduciary duty” (Legal Information Institute 2018). These laws are as important as price ceilings and floors that our government regulates today. Some examples of these are rental controls and minimum wages. Another is limits put on goods after a natural disaster that deters anyone from inflating prices for profit during shortages of products. The minimum wage control works to stabilize the economy and hold inflation in check (Grimes and Register 2016, 65). The second reason for government to set levels is to keep the purchase of certain items within reach of those at the lower end if the income scale (Grimes and Register 2016, 65-66). This was not in place during the Great Depression.