|
|
On Thursday October 24th, 1929, now referred to as Black Thursday, stock prices fell sharply by a volume of about 13 million shares. Five days later, October 29th, 1929, the market crashed by a volume of over 16 million shares. At the time this was the highest volume drop that was not to be matched for 39 years. This crash marked the beginning of the Great Depression. This crash happened due to the following reasons: ~stocks were overpriced ~Federal Reserve policies were causing disagreement and problems ~Many people had an overconfidence from the 20's which influenced a search for easy money and made many people greedy. (This brought many people into a situation they did not understand.) ~Many people took their chances in the market by "buying on a margin". This means that they bought stocks on borrowed money, money they did not have. They would be making money as long as their stock price increased, but if the prices fell then they would be deep in debt. Even though the stock market was unregulated the government did not take charge and help out which caused many large investors to take advantage of the situation. So, the "overconfident" people from the 20's ruled the market. Because of these inexperienced people coming into the stock market a lack of knowledge in what to do started forming. This made the market crash because this caused major debts and depression, and in fact the Great Depression. Between February 1930 and October 1930 the interest rate fell from 6% to 4%. The money supply increased immediately after the crash. The major effect of this crash was the Great Depression. |
