What Caused The Stock Market Crash

The Stock Market Crash of 1929 was devastating to the American economy, which up to that point had been thriving with ever increasing economic returns for investors and a bull market, which encouraged buying. The cause of the crash has been attributed to many things, but there is one underlying factor to all of the possible hypotheses, and that is the fact that more people in the population had more disposable income in the years leading up to the crash. Those people in the population who had moved to cities and taken on waged work there were becoming more successful in terms of income, and of course they too wanted to participate in the stock market, as the well-to-do did. Unfortunately, this resulted in a large volume of transactions based
The most influential theory was that of John Kenneth Galbraith in his book The Great Crash 1929, written in 1954. This attributed the cause of the crash to a bubble of overvaluation of companies due to illogical demand . It was this foundation of instability, rather than the bubble that it created, that was the cause of the crash. The foundation of instability was fueled by investors without business sense, because this created random values for stocks based on demand and supply, and supply and demand were not linked to the inherent potential of the companies. The bull market which only encouraged the continued purchasing of shares, subsequently reinforced these risky behaviors. The stock market was never meant for the non-financially literate public; the premises of stock value did not hold very well when the determination is not based on evidence beyond intuition or marketing. The growth in the stock market did not reflect increased productivity and value of companies, but rather an increasing number of people who were doing well enough to want to become shareholders. The increased demand created increases in prices, and these increases in prices led investors to believe that they had made a wise and profitable choice, leading even more people to become investors despite limited knowledge . White put
At least, that is one interpretation. Another interpretation, held by some analysts at the time, was that politics was driving the stalled action on regulation of the financial sector, as these were the friends and allies of powerful policy decision makers. The regulatory framework had been designed to allow freedom for the social class of investors that was also the community to which politicians belonged, and the interplay of interests was an important political factor in the development of American laws relating to finance before and after the 1929 crash. One analyst stated that to understand the political factors, one needed to understand that “politics has helped to shape finance through a legislative history of Glass-Steagall. The political process can be seen as a function of group interests played out through the political