Describe tge major cause of the Great depression in the 1920's?

Question

in writing about the stock market crash, be sure to explain the reason for the crash, in addition to explainging how an individual, who invested nothing into the stock market, was still affected by the crash?

Answer 1

Generally speaking, crashes usually occur under the following conditions:a prolonged period of rising stock prices and excessive economic optimism, a market where Price to Earnings ratios exceed long-term averages, and extensive use of margin debt and leverage by market participants.Understanding this is why crashes happen you can understand the  resoning by reading the below paragraph.

The Wall Street Crash of 1929, happened on October 29, 1929. The economy had been growing robustly for most of the so-called Roaring Twenties. It was a technological golden age as innovations such as radio, automobiles, aviation, telephone and the power grid were deployed and adopted.By the summer of 1929, it was clear that the economy was contracting and the stock market went through a series of unsettling price declines. These declines fed investor anxiety and events soon came to a head. October 24 (known as Black Thursday) was the first in a number of increasingly shocking market drops. This was followed swiftly by Black Monday on October 28 and Black Tuesday on October 29.

On Black Tuesday, the Dow Jones Industrial Average fell 38 points to 260, a drop of 12.8%. The deluge of selling overwhelmed the ticker tape system that normally gave investors the current prices of their shares. Telephone lines and telegraphs were clogged and were unable to cope. This information vacuum only led to more fear and panic. The technology of the New Era, much celebrated by investors previously, now served to deepen their suffering.

Black Tuesday was a day of chaos. Forced to liquidate their stocks because of margin calls, overextended investors flooded the exchange with sell orders. The glamour stocks of the age saw their values plummet. Across the two days, the Dow Jones Industrial Average fell 23%.

By the end of the week of November 11, the index stood at 228, a cumulative drop of 40 percent from the September high. The markets rallied in succeeding months but it would be a false recovery that led unsuspecting investors into the worst economic crisis of modern times

The Wall Street Crash had a major impact on the U.S. and world economy, and it has been the source of intense academic debate—historical, economic and political—from its aftermath until the present day. The crash marked the beginning of widespread and long-lasting consequences for the United States. The main question is: Did the crash cause the depression, or did it merely coincide with the bursting of a credit-inspired economic bubble? The decline in stock prices caused bankruptcies and severe macroeconomic difficulties including business closures, firing of workers and other economic repression measures. The resultant rise of mass unemployment and the depression is seen as a direct result of the crash, though it is by no means the sole event that contributed to the depression; it is usually seen as having the greatest impact on the events that followed. This unemployment is how people who did not invest in the stock market still were effected by it .Therefore the Wall Street Crash is widely regarded as signaling the downward economic slide that initiated the Great Depression.

Answer 2

The stock market crash. people used all their money to put it on their stock and when it crashed they lost everything they had including their houses, cars ,bank accounts etc.

Answer 3

Assets markets crash because there is a speculative bubble in them (like our current problem in the housing markets) and as you can see there was one in the stock market in 1929, http://upload.wikimedia.org/wikipedia/co...

Because stocks were used as collateral for bank loans , the crash caused bank failures and a collapse of the financial system and the drying up of credit for the real economy. Many economist believe it was this that made what would have been an ordinary recession into the great depression.  At that time  the fed did not intervene to stabilize banks or regulate them as they do now and we were on the gold standard until 1933 so they could not act to prevent the deflation that made things worse. People lost their saving when banks failed because there  was no deposit insurance, so they  kept their savings  hidden in their homes and there was little money for banks that did not fail to lend to business, so when they ran short of cash businesses also failed and workers lost their jobs. By 1933 the unemployment rate was 25%.