How far do you agree with the view that the Wall Street crash was responsible for the depression of the early 1930s?

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How far do you agree with the view that the Wall Street crash was responsible for the depression of the early 1930s?

The Wall Street Crash was certainly a major factor in the depression of the early 1930s, as said in source 3, ‘setting off a devastating economic collapse’. However, it was not the sole reason for the depression but only a segment. The economy was rotten well before the Crash in areas such as agriculture, industry and the banking system which had far more significant consequences.

The Wall Street crash was certainly responsible, to a certain degree, for the economic downturn which brought USA to its knees through the 1930s. The frenzy of unregulated speculation which had fuelled the huge stock market bubble, with stock prices far outrunning economic growth, had burst. When panic selling began investor anxious to minimize losses sold as fast as possible. This quickened the fall in share prices. As stock values plummeted with industrial stock falling by 50 per cent between September and November 1929, ‘business confidence evaporated’. The lenders, often including large banks, which had been fuelling the boom, called in their money and the market collapsed. When people weren’t able to repay loans to fragile banks, which lacked sufficient reserves, ‘bankruptcies and bank failures multiplied’. However, as the accredited Historian David Reynolds states; ‘In itself the stock market crash of October 1929 was not decisive, in any case only about 1% of the population owned securities in 1929’. The importance of the stock market crash was that it showed an economic future which was uncertain.  As a result millions of Americans cut back on spending and new debts which caused a massive contraction in the economy as a whole, as Aggregate demand dwindled.

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It is certainly clear that poor health of American agriculture, which had been suffering through the 1920s and did not share in the boom, had much more responsibility for the economic depression compared to the Stock market crash. In 1929, American farmers’ annual income stood at an average of $273 a year, well below the national average of $750 and their hard times as well as lack of purchasing power was an important factor. The 1920s had been a period of overproduction which had driven down the price of agricultural produce; this problem was further exacerbated by the huge amounts ...

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