What Were The Causes & Consequences Of The Wall Street Crash?

2045 words - 8 pages

1) The economic boom in the 1920s contributed to the Wall Street Crash. America at the beginning of the 1920s was a rich and prosperous country and improving all the time. America had been relatively unaffected by World War 1, this resulted in the factories of America selling goods to Europe to make huge profits. The people in America had a lot of money, especially those living in the city, which had good jobs. Even the farmers were getting a good income because the country could afford to purchase crops at a high rate. Most Americans were extremely happy and were enjoying their lives in contrast to Europe. They were living the American Dream. This is because most of the Americans had high salaries so they could afford to buy the latest equipment and the newest technologies. This was also the time when the loan and credit dealers began advertising all over the country. Banks also began advertising loans; because many residents were wealthy they could attract more, richer customers to their bank. This made a lot of poorer people jealous in the city and especially the farmers in the countryside. However by 1929 consumer durable industries began producing too much so therefore began losing money. Everyone had bought what they needed for their homes so they didn't buy more of the same goods but the industries continued producing because they thought they could sell their products. However it came as a huge nasty surprise to the factory owners and workers that their products were no longer wanted. This caused the factories to go bankrupt and shut down, which led to job losses and panic all over the stock-market. This is when The Americans knew that their happy lives were in peril.

The reason why so many people suffered was because suddenly Americans could not afford luxury and it became fashionable to invest in the stock-market. Many people began buying shares in companies and kept spending and spending on credit, also they were buying the shares on the margin. They thought that because they had a job they would be able to pay off their debts and credits. Once the factories began failing people began losing their jobs and therefore and therefore couldn't pay back the loans. This began a chain reaction; factories began closing and as a result people began panicking and started selling their shares. This meant prices on the stock-market began falling. In just one day $30billion was lost from the stock-market as well as 15 million jobs. The banks at this stage were panicking as well. They began recalling all their loans, however the people had no money to pay back the loans. The banks then began repossessing people's houses but this did not get the banks money back it only made millions of people homeless. Since the banks had no money, they shut over night, taking everyone's savings with them. Everyone who had savings in a bank, found out,...

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