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Stock Market crash of Comments 0 Please log in to add your comment. Transcript of APUSH Stock Market Crash of Thesis The stock market crash of was one of the most horrible yet also preventable event in American history.

The causes of the Great Depression can be traced back to the Treaty of Versailles at the end of WWI. The s is known for jazz, prohibition, and fast money making in the stock market. The Treaty of Versailles This treaty lead to the start of a world economy. Even though Wilson never officially recevied his "Free World Trade" from his 14 Point Plan, after the war European countries relied on the United States for goods that they could not produce. The Farmers Throughout the s the agricultural industry suffered from a depression even before the crash in Why did they suffer?

During WWI the agriculture in Europe was either stopped because there were no men to tend to crops, or the land was ravaged by the war itself. The United States sent over grain and other food to feed the people. With the increased sales farmers expanded farms and were able to increase production with the higher demand. After the war, when the men went back to work on the fields, the increased production on American farms were unneeded.

This created a surpus and the price of goods fell. When the farmers were unable to pay the mortgages of newly acquired land, many families were left without a home or livelyhood.

A Global economy makes the United States more vulnerable to other countries by requiring reliance on the economies of other countries that we are associated with. A global economy makes the United States more vulnerable to market fluxuations because of reliance on the markets of other countries that have an association with the United States. Throughout the s the Secretary of State, Charles Evans Hughes, and other Republicans encouraged policies to expand foregin American economic activity.

To help the farmers, the government instigated price controls to prevent the price of crops from dropping too low for the farmers to go bankrupt. One way the government helped was to pass laws restricting the planting of crops like peanuts and cotton. Another way the government tried to bring up prices was to buy up the surplus from farmers and either put the food in storage facilities or just burn products.

Even though parts of the country was suffering from malnutrition. The Gold Standard During the first World War, the gold standard of money was taken away to make the war time economy move more quickly. However, in the late s the gold standard was taken up again by the Federal Reserve. The gold standard means that the government will always be able to exchange the worth of gold for money. So the amount of money depends on the availability of gold.

At the time twenty dollars was equal to one ounce of gold. One of the theories for the cause of the Great Depression was the use of the Gold Standard.

This put a strain on how many investments were available, and when the demand for investments went to high, the stock market crashed. However, the theory has been proved wrong by Richard Timberlake who argues that a strict gold standard was not being followed prior to the crash and therefore could not have been the ultimate cause. Interest Rates At this time the Federal Reserve became worried that the high stock market would eventually crash.

They tried to "cool-off" spending by raising interest rates to deter buying. There is some speculation that they raised them too much. The market was showing signs of decline by in areas like residential construction, furniture purchases, and an overall decline in consumer spending.

As a result by July of industrial production was falling in wholesale goods like metals, grains, cattle, lumber, and textiles. Raising interest rates at this time caused worry for investors that something was wrong and so, the response of the Fed was too slow to prevent the stock market crash by October. Even though the stock market made it's peak in September.

Stock Market Crash of , America in the s, Primary Sources for Teachers, America in Class, National Humanities Center

On September 7, Business week is quoted, "Money rates remain at critical, uncomfortable and cramping levels, here and abroad. Security speculation has eaten nearly all of its credit cake. Stock prices are generally out of line with safe earnings expectations, and the market is now almost wholly "psychological"- irregular, unsteady and properly apprehensive of the inevitable readjustment that draws near.

Overspeculation Business leaders and economists encouraged people to buy stocks by telling them it was their civic duty. Raskob, chairman of the board of GE, wrote an article in Ladies Home Journal titled, "Everybody Ought to Be Rich".

It stated that someone who invested fifteen dollars in the stock market each month would have eighty thousand dollars within twenty years. When regular people invested in the stock market, some of them used what's called a margin account. A margin account means that of how much stock you buy, you start with a down payment and then your stock broker lends you the rest to invest into the stock market and to be paid back at a later date.

This type of credit cause much of the increase in speculation. The risks of these investments were not considered when thinking of the money that could be make in this booming economy.

Few people were concerned with overspeculation at an early time. One of those persons is Paul M. He argued for action by the Federal Reserve Board in early Yet the optimists preaching prosperity had him overruled.

After the stock market peaked in September of , the downward slope brought about panic trading by the end of October. The market bottomed out by the twenty-ninth, or in other words, Black Tuesday. Before the Market fell out on the twenty-ninth, the threat of a recession was already upon Wall Street. On October twenty-fourth Elliott V. Bell, a New York Times reporter, wrote about seeing bankers meeting in the Morgan Banking building.

Those present included William C. Potter of Guranty Trust, Seward Prosser of Bankers Trust, George F. Wiggin of Chase National Bank. However, this measure did not work because no group of men could buy all of the sales in the United States' economy. The Crash Hoover's initial reaction to the market's downturn was to keep the federal government out of the role of business.

He encouraged private groups to help the folk left with nothing from the crash. As seen in past stock market downturns plans similar to Hoover's involving no government intervolvment had worked in the depressions of and that had recovered within a year with virtually no government involvment.

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Reasons for Hoover's "Madness" The main reason to believe that Hoover's plan did not work in was because of interest rates. In , Britain dropped out of the Gold Standard and in response, the Federal Reserve continued to raise interest rates to discourage gold outflows to and from Britain. This also happened to deter businesses in America and therefore make the economic environment more difficult to succeed in.

On the whale, the fall of the stock market was inevitable because what goes up, must come down. The tragedy of the stock market crash of was that it all happened so quickly and the downturn lasted for so long after. The interest rates being raised stopped spending and cut off private businesses to the middle class.

Overspeculation left many families unable to pay for goods that became more expensive by private businesses due to the increase in interest rates. The gold standard caused many to worry, and had a psychological impact on the American mind set. Americans went from lavishing in the high life in the 20s, to clipping coupons and saving money in the 30s, all in one instant.

All of this could have been prevented by more insightful economists that listened to each other, a president that was prepared for anything, the Federal Reserve not raising interest rates no matter what was happening in Britain, and bankers and investment brokers being more careful with investments. These little things caused one of the most memorable times in American history, that shall never be forgotten and hopefully never repeated.

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