Causes of the Stock Market Crash:Stocks- stocks are portions of ownership in a company. Industries were doing poorly. People quit buying multitudes of products. This is also known as under consumption. People were not buying things because everyone already had the things that they needed. Nearly everyone had a car by this time, nearly everyone had a refrigerator, or a radio, or whatever. By 1928ish, everyone already had what they needed, and they didn't need to buy any more. Industries had mistakenly continued to mass produce these products.People were also not buying a whole lot because they were getting into debt with all of the credit that they had accumulated by buying all of their goods on credit; buy now, pay later. Another reason was because of problems with the Federal Reserve System. People were not buying homes at this time. People were looking at the Stock Exchange to see if the economy was doiong well. Real estate wasn't doing very well. At this time, the Federal Reserve System began to raise interest rates.They felt that they needed to raise interest rates to try and convince people not to buy things on credit so that they wouldn't be in debt. People saw the rates rising and began to lose faith in the economy. People began to get nervous and many people began to sell their stocks. Stock prices started losing their money and a chain reaction started in which everyone tried to get rid of their stocks before they lost all of their money.Unequal distribution of wealth- During this time, the middle class was becoming a myth. The rich people were only getting richer, and the "middle class" were falling more and more into debt which caused them to become poorer and poorer. There was only the "very rich" and the "very poor".Stocks were overpriced- Stock prices seemed to be rising to record levels nearly every day. In contrast though, companies were losing money, despite the rising value of stocks. They were losing money because of under consumption. People put two and two together and sold all of their stocks.Employment, income, production, and consumption. People began to consume less of nearly all types of goods. Companies make very little money. The company then has to lower wages and lay people off. People then have less money that they can use to buy products which causes companies to lose moeny which makes them lay people off... As you can see, this is a seemingly endless paradox in which the only end result is the destruction of the economy.The New Deal was presented back in the Great Depression. The New Deal was basically a huge stimulus package. In 1938, the New Deal started to lose effect and the economy began to decline again. World War Two aided us in getting back on our feet.Here is the book definition of the causes of the great depression and stock market crash:1. Overspeculation during the 1920's2.
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