Market+Crash+and+Why

 The Market Crash of 1929 sent the country into a spiraling depression. The first sign of the crash was on a Thursday, October 24th in 1929. It is said that on that day the stock exchange was “shook”. During the first three hours of trading stocks that day, the values plunged by about 11 billion dollars. To try and help the situation, the banks started to buy the stocks for more than their market prices. After the banks to buy these stocks, for the most part, the morning loses had been recovered. Even though the country had not lost money because the banks had brought it all back, the public was still very shaken up from the scare. Herbert Hoover makes a quote about the whole thing saying, “fundamental business of the country… is on a sound and prosperous basis”. Unfortunately, that Saturday, the prices started to slip again. It just kept getting worse and worse. The day the market officially crashed was that Tuesday, they call it Black Tuesday. The average price of a share fell 12% that day. Between September of 1929 and June of 1932 the stock exchanges lost about $179 billion in their value. By 1933 the unemployment rate raised to 25%. The market crash caused a very large depression. The Investment in the economy went the whole way down from $16 billion to $340 million; there was a 98% increase. That Black Tuesday was a turning point for our economy that sent us into a depression that would last for a much longer time than expected.(Market Crashes, Rosenberg)

There are many different reasons as to why the stock market could have crashed on that Black Tuesday. They say that the seeds of the depression were presented in the “boom” years of the 1920’s. Even though the depression did not officially start until the stock market crash there was still a very high percentage of poverty amongst the Native Americans and Mexican Americans. The farm sector of America was also in depression since 1921. Even before the depression, between 1920 and 1929 5,000 of the 30,000 banks had already failed. The farmers were not buying the things that usually buy like their tractors and implements which put a huge dent on the banks. Since the banks were failing the small business owners were failing as well because they were not able to secure loans. In the 1920’s when it seemed that America was doing well, all the shift in the income was going to the richer people. Even before the depression even began the business investment began to decline. There was so many signs that the economy was going to go down soon. Part of this was because of the 1924 immigration law that restricted foreign immigration, this depressed the housing market. The Federal Reserve, which is the nation’s central bank, allowed the money supply to fall dramatically after the crash causing people to not be able to pay back their loans. They allowed the country’s money supply to decline a drastic amount. Between 1929 and 1933 the money supply declined by 27%. They started to raise the tariff rates which limited us exports which then made it hard for the European nations to pay back their debts. In 1933 the international trade went down by 30%. The US had no federal system of unemployment insurance and the charities that would generally help people in a time of need like this had to resources to continue their help. All of this lead up to the depression and also caused the depression to go for as long as it did. (Market Crashes, Rosenberg)

Citations:

"Market Crashes." //Digital History//. N.p., 2010. Web. 25 Sep 2011. .

Rosenberg, Jennifer. "Stock Market Crash of 1929." //About.com//. N.p., n.d. Web. 25 Sep 2011. 