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The Reasons Behind The Stock Market Crash Of 1929

1390 words - 6 pages

In October 1929, the world watched in horror, investors panicked, and brokers were bewildered as stock prices plummeted lower than ever before. Fright and confusion were visible in the eyes of traders, and Wall Street was a scene of complete and utter chaos. This disastrous market crash quickly put an end to a decade of prosperity, and became the beginning to a dark and regrettable era in Canadian history (Bierman). Black Tuesday is remembered by all of us as the start of the Great Depression (Tiscali Reference). On October 29 1929 alone, thousands of investors traded 16 million shares of stock away, and the Dow Jones Industrial Average dropped a whopping 12% (Tiscali Reference). Previously during the year, stock prices had been the highest they had ever been, and in the course of only 4 months, Canadian stocks lost over $5 billion (Government of Canada). With a surplus of sellers and only a handful of buyers, stock prices fell far below the prices paid for them, and shareholders lost billions within hours (Aaseng 69). The crash was undoubtedly one of the worst economic events in history, but what exactly was its cause? Investors, the government, and economic events are all to blame. The stock market crash of 1929 was unavoidable and occurred as a direct result of market speculation, lack of government intervention, and economic slippage.Black Tuesday and the devastating events leading up to it was largely the fault of everyday investors. The market is greatly influenced by our view of it, and the confidence we have in the stocks that are available (Sparknotes). The most important and most evident reason for the great stock market crash was the excessive amount of market speculation during the prosperity of the roaring twenties (Aaseng, 26). As companies were booming with inflated income from rampant consumerism, the stock market seemed like the ideal way to earn money (Aaseng, 27). At the time, people could make up to $90 000 in a matter of weeks (Aaseng, 31)! The demand for stocks rose and their prices, along with those of consumer goods inflated well above normal. The potential for disaster in the stock market was especially high because many uninformed investors who had unrealistic expectations saturated the market buying shares on margin (Everything2). Once these investors inevitably lost money and couldn't repay their loans, a chain of debt was triggered from them, to their brokers, to the bankers (Everything2). Speculation fever hit overseas investors and opened yet another window for catastrophe. After WWI devastated Europe's economy, Canada loaned them money for rebuilding their industries. With the success of the stock market however, loans were pulled out of overseas countries and put into the shares of growing companies (Aaseng, 39). This not only hurt the European nations, but also left them unable to afford North American made products thereby decreasing our exports dramatically (Aaseng 39). Banks too, were at fault and instead of...

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