The Stock Market Crash of 1929: Causes, Effects, and Aftermath

The Stock Market Crash of 1929
Diana Meran

Thursday, October 24th, 1929 was when it all began. The stock market crashed within five
days. The stock market investors traded nearly thirteen million shares and billions of dollars
were lost that day. This event caused major issues in the United States and is one of the causes of
the Great Depression. This economic disaster however did not happen in one day. This
catastrophe was caused by several economic factors. It changed the lives of millions of people
and affected several business. It also became one of the reasons for the occurrence of the Great
Depression.
The Stock Market Crash was a result of an economy that was not steady enough to deal
with the high stock costs.Since 1924, the prices of stock shares that were financed in the U.S.
companies went up. In 1929, more than a billion shares of stock ownerships were being sold and
changing. In the 1920s, the nation’s economy really became the stock market since the total
capital was invested in it. It became easy for people to invest in stock due to the constant use of
buying on margin. That is when an investor could make a small cash down payment on shares of
stock and borrow the rest from a stockbroker ( the book pg901-902). At the time stockbrokers
were lending more than the value of the stocks that the investors were purchasing. Therefore, the
stock prices kept rising faster.
Another factor that caused the stock market crash in 1929 include the easy credit that
people had access to. Amid the 1920s, there was a quick development in bank credit and
effortless access to loans. People started borrowing money to invest in the stock market since the
share prices were rising. Individuals supported by the market's steadiness were unafraid of
obligation. The idea of "buying on margin" permitted regular individuals with minimal financial
knowledge to obtain cash from their stockbroker and put down a small percentage of the share
value.

Americans overlooked these issues and were confident that the economy and the stock market
was booming. They had false expectations and overconfidence in the stock market. This
confidence was also happening in productions such as agriculture and automobile. In the
agriculture production there was a struggle to make profit due to the decreased need of food
supplies. The demand for cars were also at a low rate which caused low sale production for the
firms. The profit results were low which caused the share prices to drop.
The stock market didn’t exactly crash all together in one day. It began on October
24th1929, known as black Thursday, marked the first day of the crash. That day nearly thirteen
million shares were traded. (INSERT BOOK INFO HERE) After the disaster, three leading
banks brought millions of dollars’ worth of shares to reinstate credence in the market. That
action improved the Dow Jones Industrial Average percentage for that day. The following day,
the stock market actually ameliorated even more as the market moved back to six million shares.
The calm and hope was short lived on the following Tuesday, October 29th , 1929. This event
known as “Black Tuesday”, when investors traded sixteen million of the stock exchange.