"No one can possibly have lived through the Great Depression without being scared by it. No amount of experience can convince someone who has lived through it that the world is economically safe." - Isaac Asimov
The Great Stock Market Crash of 1929 and the Depression that followed is perhaps one of the most memorable and unforgettable events in the 19th century. The economy began to pick up after World War I. The nation was looking for easy money to compensate for the losses in the war. The stock market became the answer. Best of all, anyone could do it; just borrow money on margin, invest it in a company, and receive a big return. Shares continued to rise as with the number of investors. But no boom lasts forever and accordingly, the "inflating stock bubble" had to burst sooner or later. On Thursday, October 24, 1929, also known as "Black Thursday," the crash began. A record of 17 million stocks changed hands. Investors scrambled to sell their investments at a fraction of the price. An estimated loss of $26 million occurred that day. America was sent into a state of insecurity, panic, and poverty - Depression. The Great Depression is not only important to those that lived during the 1920s and 30s, but also to the present population and economy. Economists, advisors, and investors are careful not to allow history repeat itself. Hence, "Was the Crash and Depression avoidable?" No. In the early stages of the post-war boom, problems with the economy were already introduced. Unfortunately, nothing could be done to fix them. Particularly, the large portion of "artificial" stock trading and the maldistribution of income and wealth could only lead to disaster - which would be the unavoidable Crash of 1929 that would lead to the Great Depression.
After the first World War ended in 1918, the damaged economy slowly repaired itself.. A slow, but steady boom was in effect. The new trend among Americans was to invest in the stock market. It was seen as an easy, no-risk, fast money making scheme where everything went up and nothing went down.
"The higher the share rose in value, the more investors thought it was a good buy. The trouble was that share prices climbed beyond their real value in terms of the dividends they might produce. To make matters worse, Americans were tending to buy shares instead of making long-term investments. This lack of secure investment reduced the spending power of those who might have bought surplus goods. The rocketing stock market was therefore making a crash all the more inevitable." (Ross, p. 33, 1998)
More and more placed their life savings into the hands of the stock market without learning about the system. This led to an increasing flood of uneducated investors focussing only on easy money. The market became the perfect place for fraud and swindling. Bankers, brokers, traders, and sometimes...