• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Explain the importance of the American stock market in 1929 in bringing about the depression.

Extracts from this document...

Introduction

Explain the importance of the American stock market in 1929 in bringing about the depression. The Wall Street Crash of October 1929 is the one trigger factor that many attribute to bringing about the Great Depression. However, despite the fact that around 61% of all stock transactions in America were handled by the New York Stock Exchange, historians and economists alike have argued that such a crash was unlikely to have single-handedly wrecked the world's economy. While it is true that the stock market crash had a profound impact on the depression - effectively deepening the already mounting problems - it must be assumed that other factors contributed to both the cause and the severity of it. There are many reasons why the stock exchange crashed in 1929. Perhaps to sum these reasons up, it is enough to say that economists of the time were utilising a 19th century understanding in the rapidly expanding and modernising 20th century economic structure. The structure and nature of the stock market is an important factor leading to its crash. The "bull market" was a term used to describe the trend of rapidly rising prices and massive volume of buying and selling. Many historians have stated that the main reason for the growth of the bull market, other than the desire of the people to "get rich quick", was the fact that ...read more.

Middle

To further exacerbate the situation, high US tariffs, such as the Fordney-McCumber Tariff Act that raised rates on imports by 33%, encouraged existing and prospective purchasers to look elsewhere for their goods. On top of this, government policy seemed to completely ignore the farming community, and it's failure to aid agriculture laid way for severe repercussions. Farmers were left in doubt as to their future, in debt and with permanent shortages of money. As one historian put it, "farmers struggled with a depression throughout the prosperity decade". Perhaps more important than this, as a factor of adding to the causes of the depression, was the mal-distribution of national income. There was becoming a considerable and significant gap between the rich and the poor. The main reason for this seems to be because, throughout the 1920's, corporate profits increased massively, where the workers wage rose only to a miniscule degree in comparison. The large sums of money enjoyed by the corporate businesses enabled more investment and more production, while at the same time, the low amount of personal funding of the general public meant that increased purchasing power was not possible. Therefore, while businesses used their capital to produce more and more, the public had not the money to consume it. ...read more.

Conclusion

Countries with large debt payments to make to the USA, on top of other financial difficulties realised that the best way to get the necessary funds was to increase their imports to the US. Hoover predicted this move and so sharply increased tariff, making the approach of larger imports into America inconceivable. However, this meant that the United States was throwing a large part of the world into an economic slump that could easily be tipped over - by the crash. The New York Stock Market crash of 1929 was indeed an important, if not vital factor in the triggering of the depression, but cannot be held to have caused it. By 1929, America's economy was riddled with faulty policy and poor understanding by experts. As Galbraith said himself; "the economy was fundamentally unsound". Stock markets have crashed before and since this period, with little or no setback to the state of world affairs. If the American economy had been strong, or even workable, then the Great Crash would probably have caused nothing more than a short-lived recession. Causes of the great depression, such as loss of confidence in the market, the banking and corporate system, international financial problems, overproduction and under-consumption, mal-distribution of wealth, and all the other faults with the American system were all wrapped up in the stock market crash, and all worked together to crate the most devastating economic set-back of recent history. Morgan Williams ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Causes of the Great Depression

    banks loans * U.S. had been creditor with $638m annual surplus 7. Republican Policy * "The Ordeal of Herbert Hoover" * laissez faire, balanced budget, trickle down, voluntarism * no use of monetary or fiscal policies * Agricultural Marketing Act, Hawley-Smoot tariff, RFC of Jesse Jones * Three Little Pigs Great Depression links Main

  2. Case Study: The Home Depot

    that they do not want lumber anymore but a better for the environment resource or that Home Depot is investing largely in stores while customers decide that they only want to shop via the internet. Other way around is also possible.

  1. Chinese car market overview. Citroen case study

    (BOOTH E,1998) B) OFFER (INFLUENCE) Ten years ago, having a car was the dream of every Chinese man, but now days, this dream has become true in lots of big and medium size towns of China. Beijing for example, is a very big town in China, where one tens of the people living there have a car.

  2. Retailing In India - A Government Policy Perspective

    their domestic partners (e.g., Cifra management in Mexican food retail, Maruti in Indian auto), and where we saw some failures among foreign players as a result of insufficient local knowledge (e.g., OEMs targeting high-end segments in India auto, or attempts of foreign retailers to sell ski boots in S�o Paulo or sit-on lawn-mowers in Mexico).

  1. An Empirical Investigation into the Causes and Effects of Liquidity in Emerging

    article comment on the 'speculative' component of volume and explain it as difference in opinion on the true value of the financial asset. Thus, in this analysis the bid-ask spread as represented by equation (1) is used. Although, this does not contain as much detailed information as the percentage

  2. Citigroup has successfully faced the challenges of the 19th and 20th centuries and has ...

    from making it highly susceptible to external threats Analyzing these different forces or elements alone is not enough to come up with a workable strategy. It is equally important to understand the relations between these various forces and determine what seems to be emerging from the combination.

  1. Review of Strong Interest Inventory.

    Each scale focuses on a narrow, concentrated interest area. Scores on these 25 scales represent individuals' vocational and life-style interests but with greater specificity. It provides greater specificity of interests than do the general occupational themes and are, therefore, typically more predictive of occupation.

  2. Great Depression, name given to the profound global economic crisis that lasted from 1929 ...

    The crash heralded the Great Depression that affected the entire world. open sidebar American bankers believed that speculation in the stock market had been encouraged by easy access to cheap credit, so their response in 1929 and 1930 was to increase interest rates.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work