Ketki Raghav Naik Sobehrad – HIST 2301 12/10/2017 The Beginning of the Economic Low: The Stock Market Crash of 1929 The Great Depression was the longest and most severe depression ever experienced by the industrialized Western world between the years 1929 and 1932. Although it originated in the United States, the Great Depression caused drastic declines in output, severe unemployment, and acute deflation in almost every country of the world. Its social and cultural effects were no less staggering, especially in the United States, where the Great Depression represented the harshest adversity faced by Americans since the Civil War. It was an event that caused drastic declines in output, severe unemployment, and acute deflation all around the world. Stock prices lost 80% of their value, the rate of unemployment was about 25 to 30%, 11,000 to 25,000 banks in the nation failed. A Domino effect could be seen as all these events occurred, a domino effect that began after The Stock Market Crash of 1929. From, 19 October,1929 to 29 October,1929 seven fateful days shook the country to its roots, leaving a staggering effect across the week from Wednesday, October 23, through Thursday, October 31. During these seven frantic sessions, a total of nearly 70.8 million shares were traded. The Stock Market Crash of 1929 was an event that is still remembered for the great impact it had, there are many different theories on how and why it occurred but the main question to be considered is whether or not it was unescapable. To find an answer to that, the causes of this unsettling event need to be studied. Many factors, along with Government policies, improvements in manufacturing, the rise in buying on credit, overpriced stocks, and margin calls, contributed to the market’s sudden downturn. Declines in key economic sectors as construction, automobiles, and agriculture were also some of the contributory factors. 1
The factor that played a major part in the Crash was the effect of The Long Bull Market. This was the period of continually increasing stock market prices which lasted from 1920 to 1929. Stock prices were reaching summits, The New York Times reported a “Stock Exchange turnover of 2,258,399 shares.” 1 This rise in the stock market, induced a sense of invincibility and overconfidence in the crowd, making them feel like nothing could go wrong within the market. Investors started gambling huge amounts of money in stocks because of this feeling of invincibility and overconfidence. The rising stock market made it attractive for companies to issue new stock. An article in The New York Times stated, “Stock Brokers Wear Badges to Avoid Errors on Floor.” 2 This article talks about how a badge system was established to avoid confusions due to an unprecedented increase in the number of Stock Market Investors. Everyone was interested in the stock market, not only businessmen but the common man was also investing in stocks.
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