Based on the Lesson of the Great Depression, Discuss Why Is Investment so Critical in Determining the Level of Prosperity?

Topics: Wall Street Crash of 1929, Stock market, Great Depression Pages: 4 (1082 words) Published: December 3, 2012
1920s was the sweetest decade for most of the people in United State, and it had to be credited to the stock market boom and the people could buy the stocks on margin as they thought stock market at that period was infallible investments where they can see their money grow effortlessly and easily. For the Americans, they perceived 1920s as the “Roaring Twenties” as the people had earned a lot of money from the stock market due to the stock price soared in upward trend started in 1924, reached its peak in 1928. Thus the people enjoyed all the luxury goods such as electric appliances, cars, ready-to-wear clothes and even houses. None of them can ever foresee the austerity is coming at the next decade when they were in the time of prosperity in 1920s. Thereby, when the stock market crash of 29 October 1929 occurred, the fact that the stock price plummeted with the hopeless of recovery had overwhelmed the whole country. It led to the people’s urge to sell all the stock immediately, afraid losing all they had. With stock market crash as a major factor, it triggered the Great Depression. However there is public perception that stock market clash of 1929 is equal to the Great Depression. In fact, Great Depression can be attributed to several causes other than stock market crash. According to Kelly (2012), the top five causes of the Great Depression are stock market crash of 1929, bank failures, reduction in purchasing across the board, American economic policy with Europe and drought condition. By here, the terms ‘stock market’, ‘bank’, ‘economic policy’, more or less link to investment when it comes to determining the prosperous ages or recession era, even without people notices. Therefore, it is apparent that investment is critical in determining the level of prosperity, especially after the lesson learnt from Great Depression.

However, what makes investment so critical in determining the level of prosperity? This is an intriguing question. Firstly, what is...
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