The 1920s was a time of peace and great prosperity in the United States. There was an increase of industrialization and there are new technologies such as radios and automobiles. The airflight was becoming widespread and because of these new innovations and technology, the economy benefited (Stock Market Crash, n.pag.).
Many investors rushed and bought many shares and everyone thought that the stocks were safe and there was indeed an economic boom. There were around 400 millionaires instantly created from 1921 to 1929 (Stock Market Crash, n.pag.).
There were six reasons why Americans invested in the Stock Market. The rising stock dividends were viewed by the people as an easy way to get rich. There was an increase in personal savings. At this time, money in the banks are available in a lower interest, there was indeed an easy money policy in banks.
While the companies choose to invest their over-production profits to new production, the Americans were encouraged to buy more stocks. The lack of stock market regulation turned the stock market in a pyrammid game. There were no limitations and buyers are free to buy more and more stocks. The last reason was the Psychology of consumption. The Americans believed that they were living in prosperity, thus, they became optimistic (Schultz, n.pag.).
In September 29, fluctuation of stocks began and the analysts thought that it was all temporary but On October 24, 1929, the people of America who owns stocks started to dump their shares and this idea of selling stocks continued until Monday, October 28 and finally, the following day, the “Great Crash” began (Schultz, n.pag.).
While most people and economists view the stock market crash of 1929 as the cause of the “Great Depression”, the 1929 stock market crash was a result of a slowing economy. The America consumers’ desire expensive items like refrigirator, radios and automobiles went down and most Americans were satisfied in what they have.
In return, this actions of the consumers affected the copmpanies who produced these products and the over-production which happened earlier that year. The companies who invested more on factories and machineries lost their profits because the consumers were already satisfied. They rather place their money in stocks than have new items in their house and this resulted to a slow economy which led to an unstable stock market.
Schultz, Stanley K. American History 102: American Civil War to the Present. retrieved May 8, 2008. http://us.history.wisc.edu/hist102/lectures/lecture18.html
“Stock Market Crash of 1929”. Stock Market Crash. (2006). retrieved May 8, 2008. http://www.stock-market-crash.net/1929.htm
“1929 Stock Market Crash”. retrieved May 8, 2008. http://www.angelfire.com/co/pscst/stock.html
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