‘The most important consequence of the Wall Street crash was the closures of the US banks’ Do you agree with this statement?
The Wall Street crash had devastating effects on American economies and society. The Wall Street crash caused businesses into liquidation and rates of unemployment to soar. It also forced the banks to close as the banks lost peoples savings on the stock market. In this essay I’m going to look into whether ‘the most important consequence of the Wall Street crash was the closure of the US banks’ or if other consequences had more effect on American society.
As prices began to rise in the early 1920s, the bank leant out vast amounts of money and many people bought shares ‘on the margin’. The banks continued to lend out peoples savings, they continued to make money as long as prices continued to rise, but On 24th October investors became nervous and started to selling shares forcing the prices into a steep decline and without investors businesses fell into liquidation , the representatives of larger banks started to buy up shares using peoples savings , giving investors more confidence, but on 27th the prices fell into freefall again but the banks didn’t support the market, as investors began selling shares at a loss, causing the prices to fall. Investors who had bought ’on the margin’ were then unable to pay back their loans. Many people lost their life savings with the banks and without money, the banks were forced to close. As banks closed down businesses were unable to borrow and fell into liquidation, without money from the banks economy was unable to recover as industry failed as money disappeared. This was an important consequence to American society as without banks money disappeared making it difficult or industries especially those that hadn’t shared in the prosperity, to recover meaning in turn economy was unable to recover. Closure of the banks also caused more problems for businesses and the economy.
