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Black Thursday Essay

850 Words4 Pages

In the beginning of 1910s, the president of the United States W. Wilson, proposed the idea of such institution as the Federal Reserve System for the US financial and economical practice. The main goal of this institution (FED) was to help US banks in the period of banking crises and exchange fevers. With such innovation, US had only increased their domination over the world’s economic and financial sphere. Politicians, businessman and economists have been spoken about the new era, which will brings further growth of welfare, full employment and prosperity of the nation. Everyone will have a chance to become rich, for this, you just only need to invest your savings into the shares of the industrial corporations, which were quickly developing …show more content…

At that day, on the New York Stock Exchange (NYSE) – broke out the panic, which led to a catastrophic decline in the stock price. During that day 12,894, 650 shares were sold. In the middle of that day, at the headquarters of JP Morgan, gathered for an emergency meeting the five largest US financiers, National City Bank, Chase National Bank, Guaranty Trust Company, Bankers Trust Company and JP Morgan. After analyzing of the situation on the stock exchange, the bankers came to the conclusion that “the quotations on the exchange does not reflect the real situation” and that there are no reasons to panic. But only after a few days, country fell into the …show more content…

In the beginning of February 1930, the FED reduced the prime-rate from 6% to 4%. Besides, by the FED was bought out the government bonds from the market to maintain the liquidity. For the next 2 years FED have not done anything, because the head of the board Andrew Mellon thought it is important for the market to find the necessary adjustments proportions and prices by itself.
In June, 1930, the United States adopted the “so-called” Smoot-Hawley Tariff Act, which basically have meant, that the US will raise duty on imports till 40%, in order to protect their domestic market. This measure, led to the beginning of the crisis in Europe, as for the European manufacturers selling products in the US was difficult.
The wave of bank failures began after the bank depositors began a bank run in the end of 1930. As a result, have been started a total reduction of the money supply. For all these months, the authorities did not response to such economical catastrophe. This led to the decreasing in GDP from 9.4% to 8.5%, and increasing of unemployment to the 3.2% in the end of

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