The crease market crash on October 29, 1929 gear up in motion a series of events that conduct to the gravid Depression, but in fact, the American rescue and global economy had been in turmoil six months prior to Black Tuesday, and a variety of factors before and after that fateful date in October caused and exacerbated the Great Depression.
False Sense of Prosperity before the Great Depression
The 1920s, known as The Roaring Twenties marked a time when America was over dependent on production, automobiles were the trail industry, and there was a great disparity between sizable and poor. More than 60% of the population was living below indigence levels, while a mere 5% of the wealthiest people in America accounted for 33% of the income, and the richest 1% owned 40% of the soils wealth. This uneven distribution of wealth was mirrored in the unequal distribution of riches between industry and agriculture.
orbicular Crisis and the Great Depression
While America prospered during the 1920s, most of Europe, still reeling from the death of World War I, fell into economic decline. America before long became the worlds banker, and as Europe started defaulting on loans and acquire less American products, the Great Depression spread.
Speculation and Overleverage in the Great Depression
With only loose stock market regulations in place before the Great Depression, investors were able speculate wildly, reach stocks on margin, needing only 10% of the price of a stock to be able to complete the purchase. Rampant speculation led to falsely high stock prices, and when the stock market began to get onto in the months leading up to the October 1929 crash, speculative investors couldnt tell on their margin calls, and a massive sell-off began. While the great bone up in the stock market (from 181 points in early 1928 to 381 points in September 1929) was fueled by optimism and false hope, the plunge was flamed by stark fear.
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