To what extent was the loss in confidence the main cause of the Wall Street crash?

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To what extent was the loss in confidence the main cause of the Wall Street crash?

The Wall Street crash of October 1929 was a product of a many things; it is difficult to put sole blame on factors like "loss of confidence" as this loss of confidence seems like a product of other factors, contributing to the Wall Street crash. Initially it could be argued that the crash was triggered by the nature of the Bull market, which included the aspect of Instability in the market, with a combination of the banking system and government control. These seem to be major factors in the crash; the loss of confidence could be seen as a result of these aspects.

The stability of the market was inconsistent and instable therefore  it was bound to collapse due to its own nature. It was accustomed to large amounts of buying and selling, which is why it was referred to as the ‘bull market’. Brokers had spoken of breaking the ceiling of five million transactions in one day. However, this seemed to be an underestimation. On the 28th November 1928, seven million transactions took place, of course a rise from the estimated five million. America had gone Wall Street crazy. The amount of trading in the market grew in line with the optimism of America’s prosperity; this optimism was fuelled by the statements of confidence given by the government. The stock market was superficial in seeming unshakeable at this stage. This was due to factors like confidence in the economy, media encouragement, brokers’ selling technique and many more which pushed the stock market into a huge frenzy. The confidence in the economy could be seen as over confident, those with surplus funds naturally wanted to use them to make even more money. The stock exchange, due to brokers selling techniques offered just the opportunity. Media encouragement was the popular press using their articles and papers to encourage readers to save $15 a month, to invest in stock, allow dividends to grow and by the end of 21 years they would have at least $80,000. Readers found it hard to argue and find faults in ideas presented like this, thus a large amount of encouragement came from the media.

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In the short term, buyers were content with the stock market, the economy was flowing. However, the long term effect of this was to be seen in the year to come. Instability in the market meant there were falls through the year from March 1928 building up to the Wall Street crash. The market had always recovered, yet in September 1929, Roger Babson warned that a crash was foreshadowing which would lead to massive unemployment and economic depression. However, Babson faced criticism for being too pessimistic and undermining the economic well-being of the nation. Regardless, President Coolidge had actually been ...

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