Critically discuss the reasons for the 1929 Wall Street stock crash as well as the economic and social impact of the crash in USA


Critically discuss the reasons for the 1929 Wall Street stock crash as well as the economic and social impact of the crash in USA

solved 0
Anonymous 2 years 1 Answer 997 views 0

Answer ( 1 )

  1. The Wall Street Crash of 1929, also known as Black Tuesday (October 29), the Great Crash, or the Stock Market Crash of 1929, began on October 24, 1929 (“Black Thursday”), and was the most devastating stock market crash in the history of the United States, when taking into consideration the full extent and duration of its after effects. The crash, which followed the London Stock Exchange’s crash of September, signalled the beginning of the 12-year Great Depression that affected all Western industrialized countries.

    Main causes of the Wall Street Crash of 1929

    The 1929 stock market crash was a result of an unsustainable boom in share prices in the preceding years. The boom in share prices was caused by the irrational exuberance of investors, buying shares on the margin, and over-confidence in the sustainability of economic growth. Some economists argue the boom was also facilitated by ‘loose money’ with US interest rates kept low in the mid-1920s.

    According to Economics Help, these are some of the most significant economic factors behind the stock market crash of 1929

    Facts about the Causes of the Wall Street Crash in 1929

    According to American Historama, wall Street Crash in 1929 can be summarised based on the facts below:

    Wall Street Crash Causes Fact 1: Causes – Over ConfidenceThe Roaring Twenties brought a new, exciting modern lifestyle to many people in the United States, as war-weary Americans began to experience prosperity in the 1920s which led to,  over confidence and optimism. It produced feelings of invincibility and irrational exuberance – many Americans believed that the good times would never end.

    Wall Street Crash Causes Fact 2: Causes – The Economic BoomThe 1920s Economic Boom was a time of financial prosperity with increases in productivity, sales and wages. There was a rising demand for new consumer products leading to massive profits for American businesses. The vast profits encouraged growth and led to the economic boom in the 1920s resulting in the rise of Consumerism, easy credit and an unprecedented increase in stock market investments.

    Wall Street Crash Causes Fact 3: Causes – Consumerism: Consumerism in 1920’s America encouraged the acquirement of goods and services in ever-increasing amounts. Consumerism increased in America as a result of technical advances and innovative inventions. Mass advertising via the newspapers and the new radio industry saw a massive increase in sales obtained with easy consumer credit. Refer to 1920’s Radio and Advertising.

    Wall Street Crash Causes Fact 4: Causes – Easy Credit: Americans desired the new labor saving devices and the new automobiles that were advertised. There was a movement away from the traditional values and avoidance of debt to the concept by buying goods on credit installments. The once “thrifty and prudent” American adopted the modern philosophy of “Live now, pay later”.

    Wall Street Crash Causes Fact 5: Causes – The Stock Market BoomAs US industry boomed, so did company shares on the Wall Street stock market. Prices of shares went up year after year, and investors made substantial profits. The Long Bull Market of the 1920’s saw stock prices soar from an average of $50 per share in 1922 to a massive $350 per share in 1929. Investors were unconcerned about what companies they were investing in, or whether the business had good future prospects – they were gambling that the stock market share prices would continue to rise. There were virtually no controls on the buying and selling of shares.

    Wall Street Crash Causes Fact 6: Causes – The ‘Long Bull Market’A Bull Market is a long period of rising stock prices. The Long Bull Market of the 1920s and the profits being made, encouraged people to engage in heavy speculation on the Stock Exchange. Stock Brokers promoted the idea of “Buying on Margin”.

    Wall Street Crash Causes Fact 7: Causes – “Buying On Margin”The system of ‘Buying on Margin’ essentially meant buying stocks with loaned money. A deposit of $1,000 would buy and investor $10,000 worth of stocks – the remaining $9,000 would come as a loan from the stockbroker. Millions of new investors were ‘Buying on Margin’ in the 1920s and bid the prices of stock up still further.

    Best answer

Leave an answer


What is 1 + 1 ( 2 )