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To what extent was the Wall Street Crash caused by speculation?

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Introduction

To what extent was the Wall Street Crash caused by speculation? The Wall Street Crash of 1929 was the most devastating stock market crash in the history of the United States of America. But to what extent was speculation at fault for a major drop in confidence in saving and buying goods; and for the crash itself? The Wall Street Crash appears to not have been caused by any one factor, including the factor of speculation. A major factor of the crash is overproduction. The confidence instilled of the American boom of the 1920s meant that more and more consumer goods were being manufactured to sell in all areas from cars to agriculture. This meant that companies were manufacturing far more than they could sell, meaning stock that was already paid for was not being sold and companies had to pay to maintain this stock in warehouses, etc. This meant that companies affected were making a loss on the remaining stock, causing share prices to fall as the deficit increased. ...read more.

Middle

Others would argue that the decreasing level of confidence and security at that time was largely the cause of the Wall Street Crash. The low confidence levels meant that people began to desperately withdraw money and sell shares meaning that banks couldn?t cope, and prices of shares decreased rapidly as people desperately sold shares. This also meant that there was little confidence in buying consumer goods with money that people believed they may need later for essentials. This also contributed to a downward spiral - as people bought very few shares and goods, share prices continued to fall and companies continued to lose money. It could also be argued that growing poverty due to the declining need for workers and the growing use of machinery to maximise profits and increase efficiency is also at fault for the Wall Street Crash. The growing poverty of the time meant that, while companies were in theory more profitable, the sales-base was declining and so were the profits. ...read more.

Conclusion

This may have affected the confidence of the general public in the economy in general, which may have caused many to desperately withdraw money from banks, thinking the economy was failing. This, as the trend didn?t cease, may have contributed to the bank failures in which many people lost everything and this is, some would say, the major cause of the Great Depression. In conclusion, there are many different factors that caused economic insecurity and possibly caused share prices to fall and the Wall Street Crash to commence. All things considered, it appears that speculation may have been a large factor, as share prices? true values don?t have to move very much but a large amount of speculative selling can cause prices to fall. This could have caused the general population of the United States to lose all confidence in their economy, which is what probably caused people who were not economists (i.e. they didn?t understand the effects of speculative selling and buying), but were trying to ?get rich fast?, to desperately withdraw money and sell shares even more. Joshua Efiong14/04/2011 ...read more.

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