The Lead-Up
In the later years of the 1920's, people believed that the stock market and the overall quality of life would continue to go up. There was overwhelming confidence in the success of the market from both individuals and banks. They began investing with money that they didn't have. That money came from stock brokers who would loan the investor a certain percentage of each share, assuming that the price of the share would rise and everyone would make money. Investors and brokers alike began to realize that the market was in a state of inflation and over speculation known as a bubble.The Panic
The market had been declining for about a month, but on October 24, 1929, the market lost over ten percent of its value. Fourteen billion dollars were lost in a single day The investors' recognition of the bubble had finally popped it. The next two days, there was a resurgence of buying from bankers trying to stabilize the market. Their strategy didn't as more than ten million shares were traded the next business day. In the following month, the Dow Jones dropped from 400 to 150. From the first signs of declining to the worst of the depression, the stock market had lost nearly ninety percent of its value.
The Outcome
At the time of the crash, less than two percent of America was invested in the the stock market. However, the people that were invested controlled a huge portion of the wealth in the nation and the banks that were invested lost their clients funds regardless of whether those individuals were involved in the market. As a result of so much wealth disappearing from the wallets of the powerful, changes needed to be made. Changes such as the termination of jobs and the lowering of wages. Many of the rich had become scared of spending and this affected the rest of the economy. The working class had lower wages and countries trading with the US felt the consequences as well.
This is a great outline for the Great Depression. I think you could also include Herbert Hoover's policies in either the cause of the effect sections because he made the depression much more serious. For example, behind the scenes he spent double the federal budget. He also created the Federal farm Board so that the government could have some control of farms, which he hoped would end the farmers' depression. Instead, this policy lead to more deflation because the government subsidies only encouraged them to grow more food.
ReplyDeleteThis was very interesting and did bring out the main ideas of how the stock market let to the its downfall and the Great depression. I think it could a little more in depth on how the lead up showed early signs of the soon to be known Crash of 1929 that lead to a decade long panic. But I found it interesting and well engaged how you seemed to explain how the market worked with banks and the chain reaction with its clients worked. When you stated "Changes such as the termination of jobs and the lowering of wages. Many of the rich had become scared of spending and this affected the rest of the economy. " you can sense how this could lead to so many things and get one thinking and understanding the chain reaction that happen in the beginning of the Great Depression.
ReplyDelete