Wall Street Crash of 1929

WALL STREET CRASH OF 1929
On Thursday 24 October 1929, the share prices on the New York Stock Exchange
collapsed. It was the most devasting stock market crash in the history of United States.
In the last hours of the past afternoon the stock had collapsed, with 2.6 millions of
shares sold, and the market remained its descendent tendence among the next week,
on Monday the stock falls a 12.8%, and on Tuesday (a day that would become known
as Black Tuesday) falls 12% more.
WHY DID THE WALL STREET CRASH HAPPEN?

For many years, United States had had a good run. After the first world war, the others
industrial nations suffered serious damage and were on the limit of the collapse, but
USA remained in a good financial position, thanks to its late entry into war, the next
decade suffered a tremendous cultural and industrial transformation, the employment
was abundant and the salaries start to increase, this period started to name as ``The
Roaring Twenties´´
The average American had its own small fortune, that Charles Mitchel the president of
the National City Bank made possible. He inspired in the succeed of the ``liberty bonds
´´, which had been released to the public for the last two years of the World War like a
way of financing the allied war effort. Seeing the profitability of this bonds, that could
generate a 4.25% of interest, the Americans began to take interest about the
investment.
Mitchel opens brokerage offices in all of the country, and in the mid-1920´s three
million of Americans were owners of shares, seduced by the easy way of getting rich,
seeing their savings multiplied in only one year.
The investment transformed from risk to confidence.
WHAT WERE THE WARNING SIGNALS?

This moment of prosperity produced the expansion of the bubble, the Americans
continued buying shares, and the most common was bought shares with margin (partly
through brokers' loans), in some cases the shareholder only put a 10% of his
investment and with those stats the money of the investor would disappear if the
market went down.
Months before the collapse the prices had fallen a little, but investors didn’t paid much
attention to it and continued buying shares for a better price due to after the market
went down, it had always recovered its position.
The fall of the market was so far of being only a bump, the reality was that this fall
produce one of the biggest crises in the history of the economy and the lost of million
dollars in American’s savings.
Manufacturing declined as a result: within three years of the Crash, automobile
production - a symbol of the good times of the 1920s - was about a quarter of what it
had been.
The unemployment increases, 6 months after the collapse the total of the
unemployment was 3.25 million.
“The first appearance in the welfare line, where, surprisingly, you met dozens of
other honest men who had followed the rules, worked hard and now had fallen as
low as the professional bums". Hugh Brogan
HOW DID THE WALL STREET CRISIS AFFECT THE US ECONOMY?
The crash of 1929 wasn’t the cause of the depression but was the trigger. The
economy suffered a enormous crisis but also the administration of the president
Herbert Hoove was insufficient. He detested the idea of the intervention of the state in
the economy and to accept that the country was submerged in a deep crisis.
He adopted a laissez-faire position, which politic would encourage businesses and
banks to get the economy back on track.
Later in the presidential elections of 1932, Hoover was destitute from his charge, and
the new president Franklin D. Roosevelt win with the 57.4% of the popular vote.
After Franklin election, population started to clamor the intervention of the
government in the market, the principal task was put the population to work and
reduce de unemployment. So the government started a direct recruitment giving the
task the same importance like a war emergency.
The effect of that solution was instant in a few minutes Franklin gave his compatriots
back their hope and energy. At the end of the week half a million of letters had arrived
the White House giving thanks for the Roosevelt actuation.
HOW DID ROOSEVELT'S NEW DEAL COMBAT THE EFFECTS OF THE WALL STREET
CRASH?
Roosevelt’s “New Deal” were the politics and the position that Roosevelt adopted to
end the crisis, and with it he could fulfil his promises in his 100 first days.
The politics consisted in 15 principal laws aimed at creating jobs and restarting
industry, the economy and, symbolically, hope.
Also installed a Emergency Banking law whose objective was stabilize the banking
system through the introduction of federal deposit insurance, the Federal Emergency
Relief Administration helped poor with soup kitchens and employment opportunities.
In the final of the New Deal had employed 2.5 million men.
The project for the reconstruction of United State was enormous and had a great
repercussion in all of the sectors of the country, but the nation wasn’t completely
united to fight for the end of the depression.
Some Democrats felt it did not go as far and deep as it might have, while many
Republicans, echoing the stance taken earlier by Hoover, felt it was an unwelcome and
invasive repositioning of the role of "big government".
Regardless of how energising the New Deal was for the nation, it did not solve the
Great Depression.
Productivity failed to revive in the way Roosevelt had hoped, while unemployment
remained high throughout the 1930s.
The Great Depression ended because of events beyond the president's control.
When the Japanese bombed Pearl Harbor in 1941, forcing the US into World War II,
the economy was slow to recover.
To supply troops overseas, productivity in the manufacturing and agricultural sectors
expanded rapidly, creating millions of jobs.
And so prosperous times would return.

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WALL STREET CRASH OF 1929

WHY DID THE WALL STREET CRASH HAPPEN?

WHAT WERE THE WARNING SIGNALS?

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