The Wall Street Crash 1929

Another long-term cause of the bust was the lack of markets abroad. The reason for the absence of this trade from export was due to the tariffs that America put on imported goods. These tariffs were first made to protect their own industry. Tariffs made goods from abroad expensive and therefore in theory American companies would buy American goods, which were cheaper, as well as selling to the rest of Europe. The problem developed when America’s export countries didn’t think these tariffs were exactly fair and so they introduced their own; this action almost totally stopped overseas trade between the countries. Large amounts of surplus goods started to appear due to the slowing of sales in America and the lack of an export market for American goods.

This overproduction of American industries had a strong affect on the U.S. economy. Some shareholders started to hear about this huge overproduction and rightly assumed that supply had not increased, but demand had dropped; meaning a drastic revaluation of the share prices of those companies.

However the majority of investors were using loans and bought shares with credit, and consequently became panic-stricken and began to sell shares hand over fist. Although the selling of shares started slowly the pace picked up and through late September and early October the sales became very noticeable. Shareholders soon realised that the banks wouldn’t intervene and control the share prices. On Tuesday 29th October 1929 Wall Street had its busiest and worst day when investors tried to dump thirteen million shares for hardly any money these few shareholders acted as the spark for the crash, and that is mainly why the crash did not happen at any other time.

The Wall Street crash of the nineteen twenties happened because of several main long-term problems which were ignited by a spark. The main points are the poor distribution of wealth and subsequent power, and the lack of overseas trade and the consequential overproduction of goods by American industry. The spark is by far the most important factor, which resulted in the boom ending. The spark was the actions of the investors, after realising that the banks weren’t going to keep the market stable. The panicked response to the surplus goods, a sign of dropping demand, was to sell shares before the price dropped below that at which they originally bought them for. As many people bought the shares with loans and borrowed money the monumental drop in price of the shares often ruined them.