Many people see this as the beginning of the Great Depression, although economists do not entirely agree. The Great Depression could have been expected based on the economic situation of the late 1920s, but the Stock Market crash itself is seen as the psychological trigger that made the citizens of America panic. THE ROARING 20s Before the Great Depression, the economy in the United States was booming and the standard of living was high. The 1920s, or the Roaring Twenties, was a decade of economic growth, booms in construction and mass-production of cars and house appliances. The United States had changed from a wartime society to a powerful and peaceful society whose economic prosperity also benefited the economies and citizens of Europe …show more content…
Many historians and economists blame overpriced stocks to be one of the main reasons behind Wall Street Crash. Overpriced stocks led people to think that the crash brought the prices back to the normal levels. Another thing that many people believe to be the cause, is fraud and illegal activity although some evidences suggests that there was little inside trading or illegal transactions. The Federal Reserve policy was seen as a cause of Wall Street Crash due to the actions of the new President of the Federal Reserve Board, Adolph Miller. He decided to have a stricter control on the monetary policy and lowered the stock prices because he was afraid that speculation would create overpriced stocks, causing damage to the economy. In addition, the beginning of 1929 brought about a tremendous increase in the interest rate charged on broker loans, which reduced the amount of broker loans given by banks and lowered the liquidity of non- financial corporations and others that financed brokers and dealers. While the president of The Federal Reserve was tightening the control, many politicians made statements about stocks being too high. For example, the newly elected President of the United States, Herbert Hoover, publicly stated that stocks were overvalued and that speculation hurt the economy. Hoover's statement suggested to the public the great measures he was willing to take in order to control the stock …show more content…
The stock market opened at 305.85, falling 11% during the day, barely a stock market correction. It regained, to close just 2% down for the day. Nevertheless, Wall Street bankers were worried because trading had tripled in volume. On Black Monday, October 28, the market fell another 13%, even though the bankers had feverishly bought stocks to prop it up. The next day, known as Black Tuesday, when the market fell another 11%, as panicked investors stampeded out of the stock market. Over 16 million shares were sold that day. Over the four days of the stock market crash, the Dow dropped 25%, losing $30 billion in market value, which is about $396 billion in today’s value. Although we are used to trillion-dollar losses today, back then the public was terrified. The amount lost in the Wall Street Crash accounted for more than the total cost of World War I. The confidence in the financial sector that is essential for a healthy economy was lost, which is why Black Thursday was such a bad day in the history of the New York Stock Exchange. Since 1922, the stock market had gone up, not down – nearly 20% a year. Everyone invested, even the ones who did not have sufficient funds at the time. A financial innovation, called buying "on margin," allowed those who didn't have the cash to buy the stock outright to invest. They only had to put 10-20% down, and borrow the rest from their stockbrokers. When the stock market crashed, brokers