Wall Street Crash

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Wall Street Crash c/w

The Wall Street Crash was caused for a number of reasons. There were many long term and short term causes which combined and led to the crash. For example: Speculation was a medium term cause as it had been around for quite a while but this led to the "Babson break" which was a trigger cause. The "Babson break" was a trigger cause because it instantly disrupted one of the most important factors in the stock market, confidence

Many people believed that the stock market was an easy and quick way to get rich, they were correct. Many Americans decided to invest in the stock market, there had only been four million share owners in 1920 but by 1929 there were around twenty million shareholders.

Around 600,000 people were speculators, they were gamblers. Speculators would borrow money to buy shares and sell them as soon as their price had risen. They would buy "on margin" which meant they only had to put down 10 per cent of the cash needed to buy shares and could borrow the rest. They would pay back the borrowed money back as soon as their shares had made a profit, this intrigued a lot of people.
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One vital ingredient in all this was confidence. When people were confident prices would rise there would be more buyers than sellers and whenever people were not confident prices would rise, all of a sudden there would be more sellers than buyers which would cause the market to crash. Confidence was a long term cause, as without it people would have never invested in the stock market.

In 1929 Confidence was shattered on the stock market due to the "Babson break". Roger Babson was an economic forecaster who predicated that the stock market would collapse. This caused ...

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