The Stock Market Crash of 1929

After World War 1, the 1920’s was the time of great prosperity in the United States. Due to the new technology the economy benefited greatly. In the years leading up to the stock market crash of 1929, the stock market had gained much popularity as a way of making money. Since stocks prices had been on the rise, they gained the reputation of being a safe way to invest. For instance, from 1921-1929, the Dow Jones went from 60 to 400. Investors were becoming millionaires in an instant due to the increase in the stock market. Some investors were borrowing a lot of money from banks. Many other investors made a big mistake, mortgaged their homes and invested their life savings in stocks. After the stock market quadrupled in value, the bubble burst and stock started to go down. The depression originated in the United States, initiating with the stock market crash of October 29, 1929 (known as Black Tuesday and the red October). It quickly spread to almost every country in the world. What happen is that investment companies were deeply in debt with banks, they sold large amounts of their stock holdings in order to raise cash. Most of them went bankrupt, worsening the banks situation, which led the banks to bankrupt as well. The banks froze credit to companies, and then withdrew their investments from Europe, especially from Germany. The crisis started with the stock market, spread to the banks and then to production. According to economist, the economic recession had already started before the stock market crash.

Some economists and historians have argued that the bank crisis caused the Great Depression. Others argued that banks failed as a result of the economic collapse. Whether the fear of bank failures caused the Depression or the Depression caused banks to fail, the result was the same for people who had their life