Wall Street Crash Of October 1929

3668 words - 15 pages

Wall Street Crash of October 1929

The roaring twenties saw a great deal of prosperity in the United States economy. Everything seemed to be going well as stock prices continued to rise at incredible rates and everyone in the market was becoming rich. Two new industries: the automotive industry, and the radio industry were the driving forces of this economic boom. These industries were helping to create a new type of market that no one had ever seen in history. With the market continuously increasing and with no foreseeable end, many individuals were entering the market because they saw the market as a sure fire way to get rich quickly. The rising prices of stocks and the large increases in trading created the speculative market that would eventually crash. On Monday, October 28, 1929, New York seemed to be the primary focus of the entire world. During that week in October, the bottom of the New York stock market fell out, an event that would lead the world into the greatest depression it has ever seen to date. Many individuals including those in the Federal Reserve Board saw the crash as a healthy thing that would bring all speculative trading to an end, and bring stock prices down to “realistic” levels. Following the crash the Fed followed a contractionary policy, which does not encourage expansion. Although that type of policy did need to be implemented prior to the crash, the decision to implement contractionary policy after the crash at best can be considered a questionable decision. The unstable financial situation of the United States that lead to the great crash can be attributed to the lack of leadership and action of the Federal Reserve in the financial world during the roaring twenties.

After the end of the First World War, the United States saw its shares of declines in the market but the overall trend after 1923 was an upward trend until 1929. Most industries in the United States saw vast improvements in manufacturing technologies and prospered because of them. The Automotive industry best illustrates the economic boom that was occurring during this time. During this era the automotive industry saw a large increase in revenues as cars became the must have leisure good of the time. The automotive industry not only increased its’ sales but also the sales of a lot of other industries that were involved in making the products used in building cars for example the steel, glass, and rubber industries to name a few. Another important aspect that would later play a great part in the creation of the speculative market was the concept of credit and installment payments, which were commonly used in the purchasing of an automobile. Although credit now days is a commonplace thing in the market, the amount of credit that was being used at the time was substantial. During the times the wealth of the nation was very unbalanced for the wealthiest people of the country took home a large percentage of the income. Due to this...

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