Causes of the Stock Market Crash of 1929 Essay
Causes of the Stock Market Crash of 1929
List and describe the causes of the stock market crash of 1929. Was the crash inevitable? Explain using examples from the presidencies of Harding, Coolidge, and Hoover. It was the time of the Roaring Twenties; where in the wake of the War jazz music was becoming prominent, Art Deco became popular, and cultural dynamism was emphasized. The twenties also led the United States into unprecedented industrial growth, inventions and discoveries of major importance, as well as significant changes in US lifestyle and culture.
Though must prosperity was achieved during the Roaring Twenties, much despair would follow by the end of them. The 1920’s saw an increase in consumer spending as well as a large increase in economic growth. The 1920’s was also an era dominated by Republicans. The Republicans took a rather conservative approach to the economy. They forged tight and close relationships between government and big business. President Warren Harding took the White House in 1921, when the United States economy was seeing the time of a depression.
Runaway inflation and a high unemployment rate swept the nation. At the time of World War I the United States economy enjoyed prosperity because of the agricultural industry. With the increase of demand came the increase of prices. With the increase of prices came the increase of output used to supply Europe. With the conclusion of the War the American agricultural industry had a massive surplus of farm goods that by any means could not be absorbed into the international market. The agricultural industry took a large spiral downwards.
With much of the depression resulting from the failing agriculture industry President Harding signed the Emergency Tariff of 1921 to help relieve some burden the farmers were being troubled with until a better solution could be put in place. President Harding also passed the Fordney–McCumber Tariff which bolstered the American tariffs to help protect American factories as well as farms. When President Harding passed his Vice President Calvin Coolidge stepped up to take the reins. Now President, Coolidge began his administration by ocusing on decreasing the income taxes of the wealthy. Coolidge managed to sustain economic stability and growth throughout most of his presidency and the decade. But soon overconfidence took its toll which contributed to the stock market crashing in 1929. By the time Herbert Hoover was elected the government continued to act the role of arbiter instead of entity. Hoover tried to end the depression by trying to convince business to cooperate and stand together to end the finical atrocity. Hoover never succeeded.
When looking at the situation the United States was in, the stock market crash of 1929 was unavoidable. There were no laws or regulations set in by the government so the market itself started to become a ticking time bomb. I honestly think that people in the 1920’s saw the stock market as a means of making substantial amounts of money, with no consequences in the end. Through the Presidencies of the 1920 we see no real push to majorly stimulate the economy to continue its progression upwards.
Yes Harding may have passed both the Emergency Tariff of 1921and the Fordney–McCumber Tariff but both only helped out farmers slightly by lessening their burden and factories by protecting them financially. Also with the increase of high stock prices, stock investors (basically the average American because all who wanted could purchase stocks) began and continued to speculate that a large return on their investments were normal. Soon people began to borrow sums of money to buy stocks. This practice was known as buying on margin.
With such a boom in business in investment trusts, many Americans began letting “professionals” buy and sell stocks for them. Since the 1920’s held such high share values investors began to borrow more and more money so they could continue to buy more stocks. Eventually the stock market hit its peak in September of 1929. At the time the market fluctuated and began to display slight signs of instability. The instability could be correlated to the fall of estate prices. But nevertheless the instability began to panic some investors. Investor began to sell their stock left and right and as quickly as they could to minimize any loss.
The panicked selling of stocks and shares resulted in the plummeting of prices in the market and ultimately led to what we know now as “Black Thursday,” or the “start” of the Stock Market Crash of 1929. But that was just the beginning of the trobles. Since the stock market was such a popular means of “making a fortune” many banks had invested large sums and portions of client’s savings in the stock market; sometimes dishonesty played in as well and the clients who had invested their savings in the bank had not the faintest of clue that the banks had illegally spent their money.
These banks who dishonestly spent their clients’ money were the firsts to close when the stock market crumpled. When people saw that banks were closing this caused more and more to panic about their money. These people, who were afraid to lose their life savings, immediately flocked to their banks to withdraw the rest of their money. The immediate withdrawal of money closed more and more banks ultimately setting the motion for The Great Depression in play.
Subject: Stock market,
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 3 November 2016
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