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Stock Market Crash Essay

1029 words - 5 pages

The Stock Market Crash of 1929 was the most devastating crash in U.S. history. It started on October 24, 1929 and the downfall ended in July 1932. I always wondered what caused this calamity. Before starting this report, I knew basic idea about the crash. It was a time of decline and huge fortunes were lost. Now I can figure out just why.
The research process for my report was no easy task. The simple part was choosing my topic. As soon as I saw “Crash of 1929” on the topic list, I had my mind fixed on it. After selecting that topic, I did a couple days of basic research and got a feel for it. The harder part was choosing a question to base my report on. The first question that came to my mind was 'How did the 1929 crash affect the U.S. economy and viewpoint on the market itself?' It was too broad and when I tried to narrow it, there wasn't information. Then, I read an article that said a company call Bear Stearns survived the stock market crash. I wondered how this company could survive while all others failed. It sounded like a really good and interesting question. I was very disappointed when I could find barely any information. Finally, I developed my third research question. How could have the Stock Market of 1929 crash been prevented? I will use this to write my paper.
To really understand why the crash occurred, some important facts must be known about the time period before it happened. The Roaring 20's was a time of success and prosperity. Some key things that happened were woman's rights, Prohibition, and industrial expansion. There was also huge production from World War I. Ford, GM, and Chrysler (aka Big 3) produced 80% of the cars in the U.S. The average income was up 20 percent. What many people don't know it that there was a dark side to the 20's. The wealthy investors gained a lot of wealth, but the regular person remained the same. 90% of the nation's wealth was compacted in 13% of the population. Farmers suffered as the produce prices sharply fell. Although the overall unemployment was low, New York City had 17% unemployed.
In order to prevent something from happening, the causes need to be known. The following three paragraphs will discuss the reasons why the Crash occurred and possible prevention methods. One reason the stock market crashed was margin buying. When you buy a stock on margin, it means that you buy a stock on credit and a promise with your broker that you will pay off the loan later. This method will increase your earnings if the stock's value rises thus making it very popular. On the other hand, if the stock's value falls, you will lose even more money. This is why margin buying is very risky especially at the high rates. When the Stock Market fell, many people went broke. Male investors jumped off the top of buildings because they were in such a bad financial situation. According to the Financial Times, the...

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