Research Paper

Submitted By HiiipowerKdot
Words: 423
Pages: 2

The 1929 Stock Market crash was a result of various economic imbalances and structural failings. These are some of the most significant economic factors behind the stock market crash of 1929. Reason 1: Credit boom In the 1920s, there was a fast growth in bank credit and loans. Encouraged by making the economy stronger, Some consumers took out loans to buy shares. Firms took out more loans for expansion. Because people became highly in debt, it meant they became more susceptible to a change in confidence. When that change of confidence came in 1929, those who had borrowed were particularly exposed and joined the rush to sell shares and try and redeem their debts. Reason 2: Buying on the Margin Related to buying on credit was people buying shares on the margin. This meant you only had to pay 10 or 20% of the value of the shares; it meant you were borrowing 80­90% of the value of the shares. This enabled more money to be put into shares, increasing their value. It is said there were many ‘margin millionaire’ investors. They had made huge profits by buying on the margin and watching share prices rise. But, it left investors very exposed when prices fell.
These margin millionaires got wiped out when the stock market fall came. It also affected those banks and investors who had lent money to those buying on the margin. reason 3: Agricultural Recession Even before 1929, the American agricultural sector was struggling to maintain profitability.
Many small farmers were driven out of business because they could not compete in the new economic climate.