The United States 1919 – 1941, The Wall Street Crash Essay Example
The United States 1919 – 1941, The Wall Street Crash Essay Example

The United States 1919 – 1941, The Wall Street Crash Essay Example

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  • Pages: 5 (1275 words)
  • Published: November 8, 2017
  • Type: Research Paper
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Between 1921 and 1929, the United States experienced a noteworthy economic upturn that persisted for eight years. Throughout this time frame, commerce thrived, earnings and income increased, and stock values soared.

The Wall Street Crash, also referred to as the stock market crash in October 1929, marked a sudden halt to the practice of regular Americans investing in shares for significant gains. This occurrence triggered a harsh economic depression throughout America due to factors such as speculation, overproduction of goods, government policies, isolationism and the stock market itself. It was widely believed that investing in stocks was an efficient way of acquiring wealth; by 1929 approximately twenty million Americans possessed shares—compared to only four million ten years earlier in 1920. The most substantial factor contributing to this crisis is deemed to be speculation.

Moreover, there were 6

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,000,000 fresh investors who engaged in speculation by borrowing finances to purchase shares, and selling them as soon as their prices rose, paying back the loans but still earning some profit. Speculation represented a gambling technique that involved risking their own funds. In 1928, speculation gained popularity as the need for additional shares grew rapidly, and prices increased considerably. For instance, in March, shares were priced at $145 while by September they had reached $413.

The boost in confidence was essential in driving speculation, leading to increased participation from buyers and sellers and ultimately causing an upswing in prices. However, as shareholders began doubting the continuously rising share prices, their loss of faith resulted in selling that led to a downturn of the economy in the United States.

In 1929, the occurrences on October 24th and 29th caused investors to panic, leading

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to the sale of a substantial amount of shares. Consequently, the value of stocks decreased continuously and resulted in numerous individuals declaring bankruptcy due to over-investment. The erroneous assumption that share prices could only rise was prevalent and contributed to even more significant losses during the market crash. Additionally, banks lacked adequate reserves and were unable to provide support for struggling companies.

The banks' predicament resulted from both excessive lending and speculation on the stock exchange, causing their bankruptcy when the market crashed. As people lost faith in the banks, they withdrew their money, choosing to hold onto it instead of making purchases out of fear. Consequently, industries lost profits due to reduced demand for goods, amplifying the cycle of depression as the situation continued to worsen.

Although not the only factor, speculation was a significant contributor to the Wall Street Crash. This impact was heightened because it occurred late in the economic cycle and was considered a short-term cause. Additionally, overproduction of goods also played an important role in the collapse but mainly affected the economy once it had already begun.

During the 1920s, the growth of the economy was dependent on a rise in product sales. Nevertheless, in 1929, American industry faced declining customer numbers. This led to an excess of manufactured goods and an imbalance between supply and demand due to mass production. The wealthier members of society had already purchased what they wanted, resulting in market oversaturation. As affluent Americans could not continue spending indefinitely, there were limits to the number of cars and refrigerators that people would buy.

Between 1900 and 1920, the agricultural industry saw significant improvements in machinery, such as better

fertilizers and harvesters. While this increased efficiency, it also resulted in unemployment for many farmers as machines and technology could replace their roles. This surplus of wheat and food then led to a lack of demand and profits for those involved in the industry, potentially leading to debts and banks going bankrupt. Additionally, tariffs placed by other countries in response to protectionist policies of the US government prevented the US industry from being able to sell abroad and further compounded the issue.

In essence, due to the inability to sell their surplus food and the resulting overproduction, many industries and big businesses were unable to make a profit, ultimately leading to the market crashing known as the Wall Street Crash. This indicates that speculation was not the sole cause of the economic collapse, as there were other economic weaknesses at play. Government policies such as Laissez Faire and 'rugged individualism' also contributed to the situation, as Republicans believed in minimal interference in citizens' lives and encouraged self-sufficiency in finding jobs without government support.

The concept was for America to decrease its dependence on the government, enabling each person to handle their own responsibilities and in turn strengthening the country. Nonetheless, some individuals struggled because the government did not offer assistance to impoverished and desperate people who lacked sufficient funds to survive. Consequently, they faced immense difficulties. As these people had not initially reaped benefits from the economic boom, this policy exacerbated their situation even further. Another Republican policy that may have contributed to the Wall Street Crash was imposing high tariffs. These tariffs prevented foreign products from entering the market, increasing competition and providing opportunities for American

businesses to flourish. However, this ultimately led to the Crash since it hindered foreign trade and impeded economic growth.

Initially, it seemed like a sound decision to safeguard the economy during the prosperous boom. However, it soon became a pivotal and pivotal moment when the Wall Street Crash took place. This was due to the British implementing tariffs to protect their own industries, rendering the Americans unable to sell their excess food supplies. Consequently, this led to isolation and difficulties for Americans, rather than aiding them. This policy ultimately contributed to the Crash over an extended period and remained problematic ever since its introduction.

It can be inferred that the Wall Street Crash was not solely caused by Republican policies, but rather their gradual impact over time. Despite being designed to boost the economy, these policies ultimately contributed to its collapse. Furthermore, the unequal distribution of wealth also played a significant role in the crash as certain areas prospered while others suffered due to uneven monetary allocation throughout America. This issue had been present even prior to the economic boom and "Roaring Twenties," with farmers and individuals already experiencing financial difficulties.

The agricultural industry did not benefit the majority of farmers, as evidenced by the reduction in total US farm income from 22 billion in 1919 to 13 billion in 1928. Canadian wheat producers' competition and Laissez-Faire government policies contributed to this, causing an unequal distribution of wealth. Impoverished individuals remained poor since there was no government support for them to afford basic necessities. The Wall Street Crash resulted in six million rural Americans losing their jobs, and many unskilled workers moved to cities, including Black Americans who

usually held low-paying and insecure work resulting in increased unemployment rates.

Not only speculation, but also the lack of purchasing power among impoverished Americans was the main reason behind the Wall Street Crash. This resulted in overproduction and a desperate need to sell products, ultimately leading to unprofitability. As banks and businesses went bankrupt due to insufficient funds for investment, it caused the economy's collapse.

A multitude of factors triggered the economic collapse. Bankruptcy of many banks and individuals due to speculation, loss of savings and decreased confidence among people resulted in reduced purchases of goods leading to business bankruptcies. Lack of government assistance fueled overproduction while American goods faced tariffs abroad, reducing demand and causing wage cuts and unemployment due to poor wealth distribution. Farmers also suffered panic selling and low profits owing to inability to purchase new consumer goods.

Due to a combination of factors, the American economy went through a period of Depression marked by decreasing stock values and rising joblessness. The Wall Street Crash can be attributed not only to speculation, but also other causes.

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