Main Causes of the Wall Street Crash and How This Lead to the Great Depression

Topics: Wall Street Crash of 1929, Great Depression, Stock market Pages: 3 (764 words) Published: April 14, 2013
What were the main causes of the Wall Street crash and how did this lead to the great depression of the 1930’s?

The stock market crash of October 1929 resulted because of problems affecting the financial sector and the resulting fall in share prices. However, the American economy of the 1920’s also had serious weaknesses that lead to a crash and a depression. The great depression of the early 1930’s would result in poverty and unemployment around the world.

One of the main causes of the Wall Street crash was certain problems within the American stock market. After the end of the First World War America, being a country that suffered little and didn’t owe much money, began to thrive. With the onset of new mass production technologies becoming available new businesses grew quickly and investors on the stock market made quick substantial profits. This lead to huge amounts of people seeking their fortune on the stock market raising the value of stocks even higher. However this mammoth amount of speculation lead to the amount of money being invested greatly outweigh the true value of the economy making the situation very unstable.

Another problem in the stock market was a loss of confidence by investors. With so much money being “bet” on companies and a lot of it being borrowed money the value of shares got as high as it could and was ready to plummet. As soon as investors doubted the company’s ability to keep growing they would try to get their money out as soon as possible, this leads to a drop in share price meaning even more people want to get out leading to a crash in the price. When Investors lost confidence across the board this happened throughout the stock market causing it to crash.

In addition to the problems in the stock market there were serious weaknesses in the American economy. For example over production, Poverty and the inability of America to sell its goods abroad. Post war the American economy was looking stronger than it had ever...
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