Causes of the Stock Market Crash
The United States experienced a time of great prosperity leading up to the stock market crash of 1929. This extreme optimism caused investors to put all the money they could into the market. Everyone believed that the economy would remain successful which led investors to spend more money than they had. Buying on margin was the main reason for investors spending so much money on shares. Buying on margin means the investor would pay 10% of the share and then the bank would loan them the rest of the money. Eventually, investors were unable to keep up on paying off the loans which resulted in most of them being in serious amounts of debt.
When the market started to fail, investors panicked and started to sell their shares for any price they would sell for. Stocks fell dramatically as everyone sold because there were fewer buyers entering to balance the stock supply. The stock market eventually collapsed when over 16.4 million shares were sold.
The stock market crash seems like it could have very well been avoided. Everyone felt so invincible at that time and they felt nothing could possibly go wrong so it’s not surprisingly that it wasn't prevented. Though not mentioned in the information above, I think it would have helped a great deal if Herbert Hoover told people what was going on instead of just telling people everything was great and to not worry about anything.
Causes of the Great Depression
The stock market crash of 1929 was the initial cause of the Great Depression. A couple months after the crash, stockholders had lost more than $40 billion dollars. Banks started to fail because many investors were in debt and failed to pay off their debt. This eventually resulted in banks not having any money at all. Without any money, businesses eventually had to close down which led to more people being unemployed. In the end, people had less money and were unable to buy products. As farmers and industry leaders realized people were unable to buy their products, they cut back production and laid off many workers. At that point, unemployed workers didn't have any money to buy products either which resulted in more and more people being laid off.
I believe the causes of the Great Depression were an ongoing cycle. If I had lived in that time period, I would have felt like there was no possible way the United States would ever get back on track. I’ve watched videos about the Great Depression and it seemed like such an unbelievable and scary time. It makes me feel very grateful to have not lived in that era.
Effects Stock Market Crash Had On Other Countries
The stock market crash of 1929 sent a surge of economic despair around the world.
The first foreign country affected by the stock market crash was England. Even though England was one of the most powerful economies in the world at this time, they still had to deal with problems of their own, specifically unemployment. A couple years after the stock market crash, the number of people without jobs in England had risen to more than 2.5 million. In response, the British government decided to no longer back their money up by gold (gold standard) thus devaluing it.
At that time, South Africa was the largest producer of gold. Since England was no longer using the gold standard, South Africa’s economy quickly collapsed.
The only country that was affected more than the United States was Germany. Germany was affected so greatly because loans from the US intended to rebuild the country’s economy after World War I were terminated after the stock market crash.
I can’t say I had ever thought about how the stock market crash had affected the rest of the world. After thinking about it and researching it, it seems so obvious. Every country relies on another country for something and in this case those necessities were being taken away which affected everyone, not just the United States.
Sources:
Effects stock market crash had on other countries Source
US History Book
Comments
Good job Alex!