Causes Of The Stock Market Crash example essay topic

Was the Stock Market Crash as terrible as some say it was? Indeed they were right because as stock prices dropped; this caused confusion and panicking among people. This led many Americans to make bad judgements turning into mistakes which lead to the Great Depression. Looking further at these bad judgements and mistakes will show how terribly the Stock Market Crash effected the lives of many Americans in the late 1920's. However first explained will be the steps leading up to the Stock Market Crash and the causes because it will make the whole concept of the Stock Market Crash easier to understand. Before the crash had happened the United States and many countries around the world was really accelerating in the fields of industrialization and technological improvements.

This era was also known as the roaring twenties and during this era wages increased, consumer spending increased, and the stock prices rose. People believed that this boom period would continue so people started to invest in the stock market by investing in the mortgage of their houses, life savings, or any money they could borrow. The most favorite method used to get money for investment which cause a lot of problems as the Stock Market Crash occurred was called buying on margin. Buying on margin was "The practice of buying a large number of shares of stock with a very small amount of one's own money (as little as 3% during the 1920's) and borrowing the rest from a broker."Buying on the margin is an extremely risky venture, because the stock (s) must increase value enough to cover the broker's loan in order for one not to lose money". (New York Times 1) This concept of buying on margin made the stock market off balance and as stock prices continued to rise many economic analysts tried to warn investors of something like the Stock Market crash but no one listened. All they could hear was the sound of money coming into their pockets.

Billions were put into the stock market by investors and on October 3, 1929 the Dow Jones Industrial began to drop and continued. At first people were not worried but as stock prices continued to fall and seemed like investors were going to lose everything they tried to sell their stocks. On October 24 also known as Black Thursday was when investors panicked but luckily leading bankers met up at the headquarters of J.P. Morgan and Company, and put up $20 million to buy stocks. Everything seemed okay to business leaders but fearful of losing anymore money many investors made bad decisions by selling their stocks. The Stock Market Crash officially started on October 29 as once again stock prices dropped. This time nobody came to save the day and on November 13 over $30 billion was lost from the American economy.

The causes of the Stock Market Crash was of many things but there are five popular explanations that many believed cause the crash. One of them was that many believed the stocks were too high overpriced and another reason believed to of caused the crash was that there was massive fraud and illegal activity going on. The third was of course the use of buying on margin which was already explained and the fourth was that public officials said they would use their powers to control the stock market for the good of the people. This lead many people to believe that their stock and the new ones they bought would be safe. The last reason for the market to crash was because of the Federal Reserve Policy.

President of the Federal Reserve Board Adolph Miller set out to lower the stock prices since he thought that speculation led stocks to be overpriced, causing damage to the economy. The policy made interest rate charged on broker loans rise tremendously starting from the beginning of 1929. "This policy reduced the amount of broker loans that originated from banks and lowered the liquidity of non-financial and other corporation that financed brokers and dealers". (The 1929 Stock Market Crash 1) Now as the market crashed many people who invested their homes, loans, or life savings became broke or like most in debt. Just like that people became poor because they panicked and made bad decisions by selling their stock just because they were afraid of losing more money. If they would of stayed calm and thought this out maybe the Stock Market Crash would of never happened.

The Stock Market Crash of 1929 impacted so much on the United States that it lead to what was known as the Great Depression. "The Great Depression was the worst economic slump ever in the U.S. history, and one which spread to virtually all of the industrialized world. The Depression began in late 1929 and lasted for about a decade". (Main Causes Great Depression 1) The Great Depression took place from 1930 to 1939 and at this time stock prices fell a whooping 40 percent. 9,000 banks across the United States closed down.

Close to 50 percent of production fell from the business cycle after the Stock Market Crash occurred. This meant that many people who had jobs at factories such as Ford was fired. This was a bad thing because about three quarters of the United Sates population spent almost all their yearly income on goods like food, furniture, clothes, and other needs. Investors blamed bankers, brokers, and businessmen for the crash and some even blamed President Hoover for the incident.

Those who still had jobs saw their wages decrease by 60 percent and those who weren't employed accounted for about 25 percent of the population of the United States which was around 15 million people. For those who lost jobs or went bankrupt because of the crash had to depend on charity for food and because of the lack of food many Americans suffered from malnutrition. People had to live out in the streets or had to find a shelter like a church or an abandoned building. There weren't a lot of full time jobs so many had to work a couple part time jobs. Before the crash the export and import value of the United Sates was close to $10 billion and after the crash the value dropped. For instance the value in 1933 dropped down to about $3 billion.

Though many people did not starve to death the birth rate in the United Sates decreased because the more kids the more mouths that will need to be fed. People who had a dreams during these dark years saw them disappear infront of them. To survive people had to work very hard just so they could eat because employers paid their employees the lowest possible wages. Young Americans who lived by themselves without no support from parents found it even harder to survive as jobs were harder for them to find. Sometimes children were even kicked out of their homes because their parents could not afford to feed them; which they had to go live out in the streets or where ever and feed themselves. Now what did many Americans do to cause the stock market to crash?

Bad decisions made by them because if they would of not panic and stayed calm then things could have been different. The Stock Market Crash was as horrible as some had suggested because it lead to the Great Depression. Many Americans suffered from malnutrition because they could not afford to buy food to feed themselves. Many had to no place to stay and so they had to sleep out in the streets. Many parents jobless sent their children into the world to fend for themselves. These are examples that show why the Stock Market Crash was as terrible as some say it was.

Work Cities Sliding Into The Great Depression. Retrieved March 4, 2002, from. Main Causes Of The Great Depression. Retrieved March 4, 2002, from The 1929 Stock Market Crash.

Retrieved March 4, 2002, from The New York Times. Retrieved March 4, 2002, from The Great Depression.