Causes of the 1929 Stock Market Crash and the Great Depression

[4erin]

We all know that the 1920’s were an extremely prosperous time for the United States. It was even known as the "Roaring Twenties." The war had just ended and people were back into their normal lives for the most part. The stock market was booming. Inventions such as the automobile were making people's lives so much easier. Industries were booming. The stock market went through the roof. People were breaking away from previous strict morals that they had brought upon themselves in the past. Casual dating became common, along with dancing. The women began to rebel. They began to drink and smoke. For the most part, life was good. In fact, life was great. The people of America were doing seemingly great. Nobody was aware they the economy that they have been so easily and prosperously building was being built up on extremely unstable foundation. It was not until that the 1929 Stock Market Crash that people would come face to face with the issue.From 1921 to 1929, the Dow Jones rose from 40 all the way to 600. Many people invested their life savings in hot stocks with little research on them because in their eyes, the stocks were always going up. The stock market crashed for a few reasons. One of the reasons is that the stocks were overpriced. Another is that people were way overconfident and becoming very greedy with the stocks. They would invest all their money because they thought that nothing could go wrong. Also, people were “buying on margin.” Buying on margin basically means that people were buying stocks with borrowed money. As long as the stocks increased they would be making money, but once they dropped, they were in deep debt. People were buying other things on credit also that they could just not afford. Buying on credit was something that was started in the twenties, and it was a major reason that the stock market crashed.The Great Depression was a major effect of the1929 stock market crash. TheGreat Depression arose because of other reasons than the stock market crash though. Another one of the reasons is that throughout the 1930s there was a huge amount of bank failures. At the time, all bank deposits were uninsured, so when the banks went down, people’s saving went with. At the time around 9,000 banks closed down. The Great Depression also arose because people stopped buying things which slowed down the economy. People were not buying things because they could not afford it, or they were afraid of falling deeper into debt. Also, many people could no longer afford things they have been buying on installment plans resulting in the items they have been paying for to get repossessed. During this time the unemployment rose to 25%. When businesses started failing in the United States, they signed the Smoot-Hawley Tariff which drastically raised taxes on imported goods to save American business, but this led to less trade with foreign countries and caused some economic retaliation.The stock market crash and Great Depression were unfortunate times in the United State's History. But hopefully we have learned from out mistakes to try to prevent devastating things like that again. Although the times are hard now, they could be worse, and we just need to so what we can to keep the economy rolling.Sources:Stock Market CrashThe Great Depression

[Mr. Bruns]

Good blog to start off the new year!!