Another reason for the crash was a lack of government intervention; the Republican policies of laissez-faire economics left the American economy to its own devices, therefore the market was not handles in a thoroughly sustainable way. The feeling of prosperity and confidence in a rising market drowned out the few warning voices that the economy was “overheating”. Herbert Hoover became President in 1928. When the Wall Street Crash happened he attempted to reassure Americans that it was merely temporary and that 'prosperity is just around the corner'. Although things showed no signs of improving, he was reluctant to help those affected by the Depression. Andrew Mellon reinforced this economic orthodoxy, and consequently the actions, or lack thereof, of the Republican government contributed to the Stock Market (Wall Street) Crash of 1929.
Furthermore, the contractionary monetary policy also affected the Crash. The Federal Reserve controlled the money supply, which was the Gold Standard Exchange, thus selling dollars also sent gold out of the USA. In an attempt to restrict gold outflows, the Federal Reserve tightened monetary policy, and raising interest rates. This harms growth as it discourages investment and consumption as credit it more expensive. Many shares were also bought “on the margin”, with up to seventy percent of the actual purchase price. Investors assuming the Great Bull market would go on forever. There was a collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up, and an obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
International economics also contributed to the Crash. The world economy of the 1920s faced severe economic problems as a result of World War Two and the subsequent peace treaties. Financial burdens, such as the reparations and inter-allied war loans on countries like Poland, France and Britain created economic instability. To raise money all European states, bar Britain, places tariffs on imported goods and raised taxes. This cut demand for US goods, therefore the US economy could not expand its foreign markets as rapidly as production. Manufacturing output increased fifty percent in the US between 1920 and 1929, but exports rose only thirty eight percent in the same period. Political unrest was endemic in China, the establishment of Communism in Russia excluded a large overseas market, and therefore international concerns also caused the Stock Market Crash of 1929.
The weaknesses of the US banking system can be blamed partly, too. Only one third of US banks were under the jurisdiction of the Federal Reserve Board; the Central Bank, therefore crop failure in one state could lead to a “run on” of other banks, and thus a banking system crisis. The collapse of share prices had a devastating effect on American banking following the Stock Market Crash of 1929.
Therefore, under consumption, overproduction, a maldistribution of wealth, and moreover, the overwhelming grip of capitalism on all aspects of American life; social, economic and political; were equally poignant as to the reasons for the Stock Market Crash (Wall Street Crash) of 1929, in New York, USA. I believe capitalism to be of the most importance of any factor.
