Causes of the Market Crash
It has been said that all good things must come to an end. In the case of the Roaring Twenties that end came abruptly and unexpectedly. It is easy for one to look back upon the economic situation that lead to the crash and ridicule the experts for not seeing the signs of a potential disaster. But it was not so easy for them to see such a crash coming. The 1920's were a booming decade and stock prices looked to be at a steady climb for a seemingly eternal rise. Many factors can be attributed to the cause of the crash but no one factor can be singled out as the solitary cause. The major causes of the stock market crash of 1929 were the uneven distribution of wealth, excessive practice of buying on margin, and the unwillingness of leading financial analysts to recognize any theories of a potential crash. One major cause of the stock market crash of 1929 was the uneven distribution of wealth. Many inventions, such as the assembly line, allowed for the mass production of goods. Along with these inventions, the government also aided business throughout the 1920's. However, while business was aided and encouraged, labor was ignored and even smothered. This complete favoritism towards business and the ignoring of labor resulted in a ver
Another important factor that was a cause of the crash of 1929 was the excessive practice of buying on margin. Buying on margin is the practice of buying a large number of shares of stock with a very small amount of one's own money, as little as 3% during the 1920's, and borrowing the rest from a broker or bank. The idea of this is to buy a large quantity of a stock which one expects to have a large increase of value, at least enough to cover the amount borrowed plus profit. This is a very risky practice because in order for it to work, the stock must go up enough to pay back the borrowed amount. If this does not happen then the broker must put pressure on the buyer to sell the stocks if there is any sign that the stock would not perform. This is a very key point in the system. In 1929 when the stock market was soaring there suddenly began to be minor decreases in the prices of stocks. This caused the brokers to force many investors to sell their stocks before they lost too much, which only inflated the problem and eventually resulted in the widespread panic and drastic plunge in stock prices. On Thursday, October 24, 1929, the day of the first drop in prices, news spread quickly of the problem and many investors panicked and quickly sold their stocks to save themselves from owing too much money to the brokers.
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Approximate Word count = 888
Approximate Pages = 4 (250 words per page double spaced)
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