Stock Market Collapse

7 Pages 1658 Words

There were many factors which lead to the collapse of the stock market on Black Tuesday, October 29, 1929, what most people called the Great Depression. The stock market collapsed “in a frenzy of selling in which a record 16 million shares were dumped….over the coming months investors lost millions and unemployment skyrocketed…….seven hundred banks closed in 1929 and eighty-five thousand businesses went bankrupt between 1929-1932.” 1 The depression lasted for about a decade. It was preceded by a decade of prosperity.
Though the stock market collapse did not cause the Great Depression by itself, it was a major factor. Other economic factors creating the Great Depressions were an over- dependence on mass production which required mass consumer spending, an unequal distribution of wealth which created an unstable economy, and extensive stock market speculation in the late 1920’s.
Mass production of goods required mass consumption, however, the average American did not have the money to make cash purchases, so they abandoned the old tradition of saving for what they wanted and began purchasing on the installment plan. According to a study done by the Brookings Institution, in 1929 “0.1% of Americans controlled 34% of all savings, while 80% of Americans had no savings at all.” 2 If Americans could not afford to buy what they wanted, they could get anything they wanted with a small down payment and pay for it over time. Advertisements were used to entice Americans to make purchases of more and more products on installment, however, most American did not have the wages necessary to provide the purchasing power needed to keep the economy growing. For example, “in 1929 Henry Ford reported a personal income of $14 million in the same year the average personal income was $750.” 3

Many Americans were attracted by advertisements to purchase a number of the new products like the automobiles, radios and household appl...