Free Essay

Reasons for the Wall Street Crash

In: Historical Events

Submitted By blaine
Words 675
Pages 3
In 1929 the Wall Street crash ended the economical boom and marked the start of the depression. The Wall Street crash was when share values fell dramatically this happened due to a number of reasons and in this essay I shall try and explore the main reasons for this.

Overproduction was one of the main reasons for the Wall Street crash. During the boom businesses were overproducing which meant that they were making more than they were selling. This was because also due to the new way of manufacturing. Production lines were most commonly used which meant that they factories could make more product in a shorter amount of time and during the boom this was a good thing as the demand for products was great but as early as 1926 the demand for goods was decreasing but business kept producing as they had been as they thought that the demand would rise again but it didn’t as many people that could afford the goods had bought them earlier on and they didn’t need any more. Not everyone had benefitted from the boom and the groups that were poor could not afford the luxuries. Even farmers had been overproducing which meant that even food prices went down and so even farmer couldn’t make a profit. A drop in sales and product values meant that businesses had to fire many workers and many farmers lost their which mean that many people had less money to spend.

After the First World War America introduced the idea of isolationism which meant that America had little to do with foreign policies this lead to the introduction of the Fordney McCumber tariff this meant that their was a tax on all foreign product which meant that the prices for these goods went up and so American product were cheaper. The tariff had helped America in the boom but as a result of the tariff many countries had put tariffs on American goods. American could then not sell their products to over countries which meant that the value of their products was reduced even more.

Credit was introduced during the boom which meant that people could borrow from banks and then pay the bank back in instalment and with interest but their were too many small banks and when people couldn’t pay back the loans many banks didn’t have money and when many people wanted to take out their savings from banks they weren’t able to as their simply wasn’t any money for them to take out.
Even during the boom the distribution of wealth was completely uneven one third of the wealth in the country was owned by only 5% of the population and 70% people were living in poverty. This also contributed to overproduction as only a small amount of people were able to afford new products. This inequality in money was also created by government policies as the government introduced laissez faire which meant that they had very little involvement in businesses so many people weren’t paid fairly.

In 1929 there was a lot of speculation on the share prices in Wall Street and as many middle class people were investors in business it lead to panic selling in Wall Street and on October 24th panic selling began and stock prices continued to fall for a full month. There were many causes for the wall street crash the main one being overproduction they was too much being continuously produce and not even demand and from this the whole economy began to fall as businesses weren’t making large profit they had to fire a lot of employees which meant that even more people couldn’t afford the products this meant that businesses had to try and sell their products abroad but due to tariffs on American goods they weren’t able to do so effectively. Government policies also had a lot do with the crash as their lack of involvement with businesses meant that many people were still poor.

Similar Documents

Free Essay

Reasons for the Wall Street Crash

...Caroline Vernet 02/14/2012 Assignment 1: Dimensions of Negotiation & Organizational Conflict Resolution Introduction Every day we are confronted to conflicts and situations when we have to negotiate. It could be either a negotiation between parents and children, employees and employers or a contract between two companies. Negotiation is a complex social process of decision making between two or more parties that discuss to find a solution for their opposing interests. Negotiation includes many dimensions. In the first part, I will present you the ten dimensions that I believe are the most important in the negotiation process, as a form of a logical framework. And then, I will develop precisely and deeply two of these dimensions that are: the Decision Making and the Motivation. PREPARATION PREPARATION Part 1 NEGOTIATION NEGOTIATION POST-NEGOTIATION POST-NEGOTIATION MOTIVATION MOTIVATION EMOTIONS EMOTIONS ACTION ACTION The framework above represents the different phases of the negotiation: Preparation, Negotiation and Post-Negotiation. In each of them, I included the dimensions that are, according to me, the most important. Therefore, before negotiating, people need to elaborate their Strategy and Planning Process as well as defining there goals. Then the process of negotiation starts by the Perception, followed by the analysis of the information. Negotiators may have a conflict because of different interests. And, to resolve...

Words: 1020 - Pages: 5

Premium Essay

How Important Was the Fear of Communism in Explaining Why President Hindenburg Invited Hitler to Become Chancellor in 1933?

...How important was fear of communism in explaining why President Hindenburg invited Hitler to become Chancellor in 1933? Intro Communism was a political idea which was beginning to become popular in Germany. However it was very much disliked as communist were seen as unruly because of street battles with police. People feared the way the USSR discriminated against the middle class and in the process of becoming communist countries had taken land away from farmers and many peasants had been killed or imprisioned. Hitler was appointed chancellor on the 30th January 1933 and this was partly to do with the publics fear of communism however it was not the most important factor. One way the fear of communism explained why Hindenburg invited Hitler to become chancellor was pressure from big businesses. Originally Hindenburg had not wanted to appoint Hitler as chancellor, he feared he would dismantle democracy and as a former leader of the imperial german army Hindenburg strngly disliked the S.A. However he was getting older and struggling to keep the republic together. The army favored Hitler to protect the state from communism and the former president of the reichsbank, Hjalmar Schacht, made it known that the business and finical world saw Hitler as the ‘lesser of two evils’. This put huge pressure on Hindenburg to pick Hitler as chancellor because he needed the support of the army and business world. Along with the army and business world, support for Hitler in the public was...

Words: 814 - Pages: 4

Premium Essay

'the Usa Was Hit by the Great Depression in 1929 Because of Increasing Restrictions on International Trade.' How Far Do You Agree with This Opinion? Use Sources 7, 8 and 9 and Your Own Knowledge.

...and your own knowledge. The USA was hit by the Great Depression in 1929 because of increasing restrictions on international trade to a small extent, as it was indeed a significant factor in creating the onset of the Great Depression, as it acted as one of the long-term problems with the US economic system. Source 7 supports this argument, and suggests that it made world trade more difficult as it led to the USA not being able to 'expand its foreign markets as rapidly as its production'. However, other factors could also be considered to have started the Great Depression more significantly, with source 8 suggesting that it was due to long-term problems in the economy associated with a lack of purchasing power and the effects of the Wall Street Crash, along with source 9 demonstrating that it was due to the laissez-faire policies pursued by the Coolidge administration. The USA was arguably hit by the Great Depression in 1929 because of the combination of under consumption and overproduction linked to the maldistribution of wealth in US society during the 1920s. The problem with under consumption was mainly due to the fact that a substantial segment of the population that was farmers and workers in declining industries had not shared in the general prosperity of the early 1920s. In 1929, American farmers annual income averaged at $273, whilst the national average was $750, demonstrating the significant lack of purchasing power they had. This was a problem before the onset of the...

Words: 1896 - Pages: 8

Premium Essay

The Wall Street Crash

...In this essay I will be discussing what affect ‘The Wall Street Crash’. There was many reasons for the crash and the crash had effect on all the people in America. I will be discussing the way the depression effected people. One reason why there was a depression was because wealth was not shared out fairly in the USA. Sixty per cent of American families were living below the poverty line. As a result many Americans could not afford to buy the products like vacuum cleaners and cars. By 1928 American factories were over producing. They could not sell their goods abroad because tariffs were high on American products. Factories had a cut production off by laying off workers. As result unemployment grew. Another reason for the depression was because farmers were experiencing serious problems. In the 1920’s farmers were producing too much food and it was going to waste. As a result food prices fell. Farmer’s incomes fell so they borrowed money from the banks. They also tried to produce more food which meant prices fell even lower. As a result farmers were unable to pay back the money they borrowed from the banks. The banks ended their mortgages and took their houses and their forms. Thirdly speculation and the Wall Street Crash caused depression. Millions of people had borrowed money to buy shares hoping to have better lives and become wealthy. People who had brought shares lost a lot of money. They could not repay the money they had borrowed from the banks. Hundreds of banks...

Words: 467 - Pages: 2

Premium Essay

Birth of the Great Depression: Causes of the 1929 Stock Market Crash

...History March 11th, 2013 Birth of the Great Depression: Causes of the Stock Market Crash of 1929 It was a time of great economic growth in the United States after World War I. The economy was growing rapidly, fueled by industrialization and the rapid development of new technologies such as the automobile, electricity, telephone, aviation and radio. Many people and businesses began investing in the stock market at this time. The stock market is the organized trading of stocks. The owning of stocks gave people partial ownership of a company while infusing cash into the company. In return, people earned money on their investment as the company grew. The stock market provides financial support required by large business to establish and expand their enterprises. This in turn allows companies to grow and increase employment, provide a community tax base, and other financial benefits for the people and the economy. In the 1920’s the stock market boomed. During the 1920’s people were enthusiastic and more willing to take risks. They brought this attitude to the stock market, causing stock prices to increase exponentially. However, the severely overpriced and unaffordable stocks and willingness of the people to carelessly invest their money lead to one of the darkest days in U.S. history: October 29th, 1929. This is the day the stock market crashed, known in infamy as Black Tuesday. The stock market crash of 1929 was caused by numerous flaws in economic policies and actions taken by banks...

Words: 2808 - Pages: 12

Free Essay

America in the 1920's

...America in the 1920’s The Boom Period During the 1920s there was a prolonged boom in the American economy. Industrial production doubled, the economy grew rapidly and fortunes were made. Life had never seemed better for the majority of the American people. The boom developed for a number of reasons. World War I The European economies were exhausted by the cost of waging a long war. In comparison, the USA grew rich during the war years. Its late arrival to the war, and the fact that its cities and industries were not bombed or destroyed during the conflict, meant that at the end of the war it was able to capitalise on the perilous state of European industry and dominate their markets. New technologies The first 20 years of the twentieth century saw huge technological advances in industry. Factories became automated. Machines and other improved manufacturing techniques meant that huge amounts of goods could be made at a fraction of the cost. The age of mass production had arrived. In the decade of the 1920s economic output increased by a staggering 50%. Consumer boom Because goods could be produced in greater numbers and at much lower prices, more people were able to afford them. This led to huge increases in the sales of products such as cars, refrigerators, radios and cookers. Buying on credit This consumer boom was greatly aided by the availability of hire purchase - the ability to buy goods on credit. Because times were good, people were not worried about...

Words: 968 - Pages: 4

Premium Essay

Great Depression

...Great Depression HIS/125 10-20-2011 Great Depression Many people credit the stock market crash of 1929 cause the Great Depression it was only one of many reasons that brought on the Great Depression in America. The Great Depression lasted from 1930 until the US entered World War II, and with the work that World War II brought to industry America was able to climb out of the Great Depression. The damage that the great stark market crash due to the economy is unparalleled in American history. It not only hurt Americans at home but also abroad, Europeans did not trust America anymore due to this crop prices abroad sunk to new lows. Farm income in America dropped by more than half (Davidson, 2005). Bank failures also spread from the rural banks to the cities, depositors rushed to withdraw their cash, this sent the American economy in a downward plunge. The automobile and construction industries also began to lag. But overall the causes for the Great Depression started earlier, that when the great crash happened. In the year 1928 to 1929 consumer spending and services dropped to 1.5%. (Davidson, 2005). The booming economy has hurt itself instead of paying workers higher wages businesses use their profits to expand their factories, this in turn led to, workers who did not have enough money to buy the products that they were making at efficiently and lower costs (Davidson, 2005). Workers started borrowing or using credit to pay. Consumer debt...

Words: 447 - Pages: 2

Premium Essay

To What Extent Did Support for the Nazi Party Change Between the Years of 1923-33?

...Joshua Painter 27/11/13 Nazi Support ‘To what extent did support for the Nazi party change between the years of 1923-33?’ Between the years of 1923 to 1933 support for the Nazi Party grew 37% from 7% share of the votes in 1924 to a much larger 44% in the elections of 1933. The success that the Nazi Party gained over these years was due to many changes and promises that Hitler and the Nazi Party made to the public. As the Nazi party had done so poorly in the 1924 elections, gaining just a 5% share of the votes, Hitler knew that he would have to make some drastic changes in order to gain power. The failure of the Munich Putsch also led Hitler to realise that the only way that he would be able to gain this power was through democratic, legal means. After the Putsch Hitler set about making the changes to the Nazi Party that were required to turn around the parties fortunes. The Nazi Party used propaganda very effectively to gain support. They played on Historic fears and complaints with great effect. Hitler was well aware that the people of Germany felt great animosity towards the Treaty of Versailles. He used this for the Nazi Party’s own political gain by using the Jews as a scapegoat for Germany’s problems during the 1920’s and by promising to the people that if he was in power he would tear up the Treaty of Versailles. By doing...

Words: 1766 - Pages: 8

Premium Essay

The 1920 Wall Street Bombing

...With Occupy Wall Street gaining headway and the country seeing greater inequality than ever, anarchists and socialists protested in the streets of Lower Manhattan’s “Corner” in a rage at the banking systems. Before the turn of the century, the feelings projected toward the financial barons of New York were all but tranquil. Because the majority of the wealth among a few happened at the expense of laborers and echoed with Americans, its result lead to terrorism (King 2011). On September 16, 1920, an explosion tore through the streets of Lower Manhattan’s “Corner”. The Wall Street Bombing of 1920 was the deadliest terror attack on American soil until the Oklahoma bombing 75 years later. The blast killed 38 people and injured hundreds of others (Andrews, 2015). Although the case remains unsolved to this day, there were many suspects. Investigators believe their strongest lead was the Italian anarchists of the time. On Thursday September 16, 1920, an unknown driver pulled a horse drawn wagon filled with one hundred pounds of dynamite and sash weights up to the corner of Wall and Broad Streets in Lower Manhattan, an area often called “The Corner”. “The Corner” was described by author John Brooks as “the precise center, geographical as well as metaphorical, of financial America and even of the financial world.” The building on “The Corner”, housed the most powerful financial institution in the world, J.P. Morgan Co., as well as professionals like J.P. Morgan Jr. and Thomas Lamont...

Words: 1801 - Pages: 8

Premium Essay

General Motors Assignment

...General Motors General Motors a company that has been around since 1908 has had its fair share of complications. The recent complications have been because of faulty parts that have not only caused deaths but these parts were ignored until February 14th of this year. This problem hasn’t just sprung up in the last few months this problem has been going on since 2001, almost 15 years. To make this problem even worse GM was just bailed out by the Government of the United States of America in an attempt to save the economy from another economic decline. There have been several court cases brought against GM due to fatal crashes. According to The Wall Street Journal, the first fatal crash involving 2005 Cobalt whose airbags did not deploy in a frontal collision. (Wall Street Journal) That is nearly 10 years that GM has looked the other way while the problem with their vehicles killed people. This is a big problem. There are many customers that rely on GM to give them not only quality but safety and piece of mind. GM has failed their customers, the country, and to abide by the law. Something must change if GM wants to be around in the future. They will have to change everything about the way they run their business. As I discuss GM I will cover how human resources management will deal with the faulty parts, federal reporting compliance and law, future lawsuits, and public image. Human resources have many things to recover from. There have been many mistakes that have been made....

Words: 1177 - Pages: 5

Premium Essay

Global Financia Crisis Impact and Challenges

...Global Financial Crisis Impact and Challenges Shaikh Faisal. Assistant Professor Dr. Rafiq Zakaria Campus Millennium Institute of Management Aurangabad Introduction: The global financial system has undergone a period of unprecedented turmoil. Market confidence dwindled and has remained fragile, leading to the collapse or near-collapse of large, and in some cases systemically important, financial institutions, and calling forth public intervention in the financial system on a scale not seen for decades. The financial system has been severely weakened by mounting losses on impaired and illiquid assets, uncertainty regarding the availability and cost of funding, and further deterioration of loan portfolios as global economic growth slows. Finding a purely private sector resolution of financial market strains has become increasingly difficult, while case-by-case intervention by authorities has not alleviated market concerns. In response, more comprehensive approaches are now being considered or implemented to bring about a more orderly process of deleveraging and to break the adverse feedback loop between the financial system and the global economy. Such a comprehensive approach—if well coordinated among countries—should be sufficient to restore confidence and the proper functioning of markets and avert a more protracted downturn in the global economy. Significant writedowns have already been realized, but more may lie ahead. . . The estimate of aggregate write downs...

Words: 3684 - Pages: 15

Premium Essay

For Love of Money

...For the Love of Money In my last year on Wall Street my bonus was $3.6 million — and I was angry because it wasn’t big enough. I was 30 years old, had no children to raise, no debts to pay, no philanthropic goal in mind. I wanted more money for exactly the same reason an alcoholic needs another drink: I was addicted. Eight years earlier, I’d walked onto the trading floor at Credit Suisse First Boston to begin my summer internship. I already knew I wanted to be rich, but when I started out I had a different idea about what wealth meant. I’d come to Wall Street after reading in the book “Liar’s Poker” how Michael Lewis earned a $225,000 bonus after just two years of work on a trading floor. That seemed like a fortune. Every January and February, I think about that time, because these are the months when bonuses are decided and distributed, when fortunes are made. I’d learned about the importance of being rich from my dad. He was a modern-day Willy Loman, a salesman with huge dreams that never seemed to materialize. “Imagine what life will be like,” he’d say, “when I make a million dollars.” While he dreamed of selling a screenplay, in reality he sold kitchen cabinets. And not that well. We sometimes lived paycheck to paycheck off my mom’s nurse-practitioner salary. Dad believed money would solve all his problems. At 22, so did I. When I walked onto that trading floor for the first time and saw the glowing flat-screen TVs, high-tech computer monitors and phone...

Words: 2510 - Pages: 11

Premium Essay

What Caused The Stock Market Crash In America Essay

...A major turning point in American is the Stock Market Crash of 1929 or The Great Depression as many called it. The early 1920’s were an amazing time to live in, jobs were everywhere, money was coming in and the banks were giving out loans. The crash happened from the same policies that had made the 1920s so great. Since nobody knew how to use the stock market, and people weren’t paying back the credit that was loaned from them from the bank, is a major cause of the crash. The American people were looking for easy money through the stock market, which also caused many to be greedy, which brought many new people including immigrants into a situation they did not understand. Also, the people weren’t concerned or didn’t know that the stock market...

Words: 562 - Pages: 3

Premium Essay

Fdr New Deal Was Successful

...Michael Borukhov New Deal was Successful The United States of American hit a tragic point in the 1930’s as we know it today as the great depression. The reasons that lead to the great depression were the Wall Street crash of 1929. This capitalist economy held the rich in a beneficial position and the poor in a horrific position when this economy collapsed the poor did not bear the suffering it was the rich. Unemployment and various other effects of depression hit the US hard as a result. The main cause of this depression can be attributed to the Wall Street crash, tariffs on foreign goods, a massive poverty gap, overproduction and speculation and other factors. By 1932 Unemployment was over 25 million. The New Deal was successful because it helped decrease unemployment rate through different programs it implemented. Franklin Delano Roosevelt’s objectives were to revitalize the economy as the aftermath of the depression. The way he can/would do so is to bring the unemployment rate down. Roosevelt also wanted women and African Americans to have more rights. He asked “Congress to fund relief for millions of unemployed Americans. In May, Congress established the Federal Relief Administration (FERA)”(742) Shortly after in November of 1933, Roosevelt established the Civil Works Administration that put 2.6 million men and women to work 1929 | 2.6 million | 1933 | 15 million | 1935 | 11 million | 1937 | 8.3 million | 1938 | 10.5 million | 1939 | 9.2 million...

Words: 728 - Pages: 3

Free Essay

Globalization

...Cultural Tension It has been argued that without the economic chaos caused by the crash of Wall Street, the Nazi party may have only remained a small political party. After the crash in 1929 the support of the Nazi’s took off. In an attempt to climb from the Great Depression the Nazi’s developed nationalism (chapter 7, page 219). Nationalism was displayed by the clothes worn by the Nazi party, the flags flown, and the unity they tried to preserve. The Nazi party controlled by Hitler went to great measures to keep their ethnic group alive. Hitler seemed to believe in self-determination (chapter 7, page 217). The reason Hitler turned to genocide was he blamed the Jews for Germany’s defeat in World War 1, causing economic hardship. He believed the Jews were actively engaged in a conspiracy to keep the “master race” from being in power. The Jews were gradually being shut out through never ending laws and decrees to deprive them of German citizenships. When this wasn’t moving fast enough for Hitler, he started the movement to remove and dehumanize the Jewish people. For Example: He began by having the Nazi party transfer the people by train, compacting the train with 200 plus people causing suffocation. No food or water was distributed so most people died before making it to the concentration camps. Jewish people had to pay money to the Nazi’s to be exterminated. I believe the reason this conflict turned to genocide is because of the economic state. People began to believe...

Words: 574 - Pages: 3