1Stock Market Crash of 1929 and Great Depression
2Stock Market Crash of 1929 and Great DepressionStock market crash of 1929 and Great DepressionContents:-Background Causes of crashReforms after the crashEffects of crash Great depressionThe great depression was the longest and most severe economic depression ever experienced bythe industrialized Western world. The timing of the depression varied across the countries, but itmostly occurred in the 30’s and 40’s of 20th century. Even though the depression was relativelymild in some countries, it was severe in others, particularly in the United States, where it wasoriginated.After World War I, the United States had become the major creditor and financier of postwarEuropean countries, whose national economies had been greatly weakened by the war itself, bywar debts, and, by the need to pay war damages. So, once the American economy weakened andthe flow of American investment credits to Europe stopped, prosperity tended to collapse there aswell. The Depression hit hardest those nations that were most deeply indebted to the UnitedStates such as Germany and Great Britain. The end of World War I brought a new era in theUnited States. It was a time of enthusiasm, confidence, and optimism, and people believed ininfinite possibilities. They were taking their savings out and invest it to build new technologiesand new inventions. Even though, there is no agreed upon listed causes of the depression, thestock market collapse of 1929 was its biggest reason. It all started with the stock market collapse:In the 1920s, many invested in the stock market, which seemed a reliableinvestment in the future. As more people invested in the stock market, stock prices began to rise.Stock prices went up and down throughout 1925 and 1926. This flow followed by a sharpupward trend in 1927 and enticed many more people to invest causing the boom to begin by1928. The stock market boom changed the way investors viewed the stock market – it hadbecome a place where people believed they could get rich quickly. The stock market no longerwas for long-term investment. Stocks had become the conversation topic for everyone ineverywhere because ordinary people were able to make millions off of it. Although an increasingnumber of people wanted to buy stocks, not everyone had the money to do so. That was when“Buying on Margin” concept came in to play. When someone did not have the money to pay thefull price of stocks, they could buy stocks "on margin." That means that they would put downsome of their own money, but the rest would be borrowed from a broker. Buying on margin is
3Stock Market Crash of 1929 and Great Depressionrisky: if the price of stock falls lower than the loan amount, the broker will likely issue a "margincall," and the buyer must come up with the cash to pay back the loan immediately.
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- Spring '17
- Great Depression, Wall Street Crash of 1929, Stock Market Crash