Stock Market example essay topic

The Great Depression not only affected the United States but the world in general. In my estimation some the reasons for the depression was the combination of the greatly unequal distribution of wealth throughout the 1920's and the debts not paid back from WWI. The distribution of wealth in the 1920's, "roaring twenties", was done with despair between the very wealthy and the lower classes, between industry and agriculture within the United States, between the U.S. and Europe. This imbalance of wealth created an unstable economy. The excessive assumption in the late 20's kept the stock markets artificially high, which eventually lead the large market crashes and the American economy to turn over. The "roaring twenties" was an era when the U.S. prospered immensely.

The nation's total income was rose tremendously, but not equally. The "Coolidge Prosperity" of the 1920's was not evenly shared among Americans, which led the rich to become richer, by not having to pay such high taxes, and the poor to not prosper. This widened the gap of disparity even more. In this period of time there was an increased manufacturing output, which made more money for the manufacturing plants and the people who invested in it, but not for the workers. There came to be an oversupply of goods and not enough buyers.

During this time credit sales became a big thing for people to use to buy products. The government made it easier to just put it on credit, thinking that it would be paid off at a later time and it would also help the economy. Many American's used this method, which even led the European country's to pay for their supplies on credit during the war. The European nations were struggling to rebuild themselves from the damage after the war.

The U.S. government lent the European allies billions of dollars for the war to purchase U.S. goods. After the war they were in no position to pay off debts. Their gold had flowed into the U.S. during and immediately after the war, ruining their own currencies. To make the wealth distribution between Europe and the U.S. even more devastating was the high tariff policies put into effect on imports into the U.S. The effect of these tariffs caused the Europeans to be unable to sell their own goods to the U.S. in equitable quantities. To keep the economy going prices had to fall for people to afford to buy things. There was a high volume of goods building up, especially in the agricultural business.

The government had been paying great amounts of money to the farmers for crops and things to support the war and encourages them to also expand on their land and plant more crops. Now that the war was over the government had pretty much stopped investing so much into the agricultural business, which led to many farmers going bankrupt. The stock market, to me, is like another world of credit and debt. There were mass speculations through out the 1920's that led to record volumes of shares being traded on the stock exchange. People could buy stocks on credit very easily at this time because the market was so good. By 1929 the outstanding brokers loans were up to $7 billion dollars and eventually higher.

The interests rates for the brokers went higher and higher. The stock market is based on confidence and when the prices started going down so did the confidence of the investors. The market pretty much crashed on the basis of fear. People started selling their shares quickly and this led to economic destruction. People stopped spending money on things that weren't a necessity like luxury items. The production industry had to slow down because their products weren't being sold and just stacking up in warehouses.

This led to people loosing their jobs and then interest payments being defaulted on. Internationally people stopped lending money to foreign countries. The Hawley-Smoot Tariff was put into effect that caused a lot of foreigners to stop buying American products. This caused stores, banks and factories to close, leading to millions of people being unemployed. The economy spiraled out of control causing The Great Depression.