Causes of the Wall Street Crash

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Causes of the Wall Street Crash

On 24 October 1929, some shareholders began to lose confidence and
believing that the prices of shares could not continue to rise
forever, decided to sell. A panic began, and so many shares were sold
on that day that it became known as Black Thursday. The Wall Street
Crash was under way. By Tuesday 29 October so many shares were being
sold that the teleprinters could not keep up, share prices continued
to fall, and people lost vast sums of money and were ruined.

Causes of the Wall Street Crash
-------------------------------

The reasons that led to the Wall Street Crash can be put into two main
categories:

* Those to do with the overproduction of goods.

* Those to do with money and the stock market.

Reasons linked to overproduction that led to the Wall Street Crash:

1. Companies were producing too many goods.

2. American goods could not be sold abroad because other countries had
put tariffs (taxes) on them to make them more expensive.

3. When the demand for goods began to fall, workers' wages were cut
and some workers became unemployed, which meant that they could no
longer afford to buy the new consumer goods.

4. Farmers could not afford to buy the new consumer goods.

Reasons linked to money and the stock market that led to the Wall
Street Crash:

* People were allowed to borrow too much money and they could not
afford to pay it back.

* People had taken out loans or invested their savings in the stock
market, but there were too few controls on the buying and selling
of shares.

* The US President had not taken any notice of what was going on; he
just left the businesses and banks to themselves.

* Advertising and hire purchase agreements were not controlled, and
this encouraged people to spend more.

* Too many people thought that share prices could only go up, which
encouraged them to invest more than they could afford in the stock
market.

* Banks did not have enough money in reserve to help businesses that
were in trouble. This was because they had lent too much money but
now the banks were facing difficulties because people could not
afford to repay their loans.

Exam tip

Try to group reasons together and, where possible, show how one event
led to another. If you can show this technique in your exam it will
get you higher marks.

Outcomes of the Crash
---------------------

The Wall Street Crash brought the Roaring Twenties to an end and led
to a Depression in America. What effect did this have on American
society?

Here are some examples of how times changed after the Wall Street
Crash.

1. President Hoover and the belief in prosperity

2. The growth of shanty towns

3. Food shortages

4....

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