"October 29, 1929, "Black Tuesday," is remembered as the most devastating day in American stock market history. Stock prices fell in a selling frenzy that began the moment the opening bell sounded. When the trading day was over, the Dow Jones Industrial Average had dropped more than thirty points, with some leading stocks plummeting $30-$60 a share. Billions of dollars of fortunes and the life savings of many small investors were wiped out as the decline of the market, which had begun in September, culminated on Black Tuesday. Few people had foreseen the coming of the Great Crash. The country had been riding on the boom of the 1920's."
Source Citation: "The U.S. Stock Market Crashes On Black Tuesday, October 29, 1929." DISCovering World History. Online Edition. Gale, 2003. Reproduced in History Resource Center. Farmington Hills, MI: Gale. http://galenet.galegroup.com/servlet/History/
The Stock Market Crash was less dramatic than the common lore portrays it, but it was dramatic given the way people in the twenties viewed the time period. So respond to the following IB prompt given what you know from class and reading the two articles.
"To what extent was the Wall Street Cash a cause of the Great Depression of 1929 in the United States? Support your argument with specific examples"
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The Wall Street crash was definately a lead in to the Great Depression, but most certainly not the sole reason. One reason for this crash being a lead in is that, it was over an extended period of time (september.3-November.13) not just a two day thing, like most people are led to believe; so the three month period the economy was slowly losing money.
ReplyDeleteAlso the Bull Market crash played a role in the Great depression as well. The Bull market was said to have "suffered two sharp breaks" and "it took a prolonged devestating collapse."
In conclusion,The Wall Street crash played a role in assisting the Great Depression, but was not the leading cause.
The Wall Street Crash was the most prevalent short term cause of the Great Depression, but the Crash was a result of other factors and therefore does not warrant the most blame. The largest and most important cause was the abundance of Republican economic policies during the 1920's.
ReplyDeleteMcElvaine argues that the most important root of the Depression was the maldistribution of wealth. While this is important, it does not go to the deepest root of the problems. The Republican policies of the 1920's allowed the distribution of wealth to become more and more lopsided. The Mellon Revenue Act of 1926 lowered taxes for people across the board but most heavily for the rich. Businesses and the wealthy received a 25% tax deduction. The lack of sufficient funds from taxes led the Republicans to increase tariffs to the point of absurdity to make up the lost revenue. The Fordney McCumber Act of 1922 raised tariffs on industrialized goods 38%. The rich became even richer with lowered taxes and more money for the same goods from the high tariffs. This in addition to cutbacks at the FTC allowed the rich to get away with shoddy business practices and heightened their ability to keep the working force poor. McElvaine does not give enough credit to the Republican economic policies in their creation of the great maldistribution of wealth. He is correct, though, in stating that their were many upon many causes of the Depression.
The Wall Street Crash was the tipping point for the economy and the beginning of the Depression and is surely a cause. It was not the underlying cause however, and must not get so much credit.
The Wall Street Crash was a cause of the Great Depression, but it wasn't a main cause. It only played a secondary role compared to some of the other causes that were much more prevalent and important. The Crash was more of a precursor of what was to come. It is the very start of the Great Depression. It only lasted a short time so people thought that it was nothing, but when the big disaster struck they saw that it was something. As Garraty said, "The financial losses that this swift decline reflected and the panic and despair it generated among investors account for the association that people made between the Great Crash and the long depression of the 1930s." This shows how it was not necessarily the cause of the Great Depression, but a very early part of it.
ReplyDeleteThe Stock Market Crash, at the time, may have seemed like a largely contributing cause to the Great Depression, only because of its drastic affect on the American people. Now, however, one is able to look back and see the steady downward spiral of the economy in the months leading up to the Depression. Yes, the Crash did influence the U.S. economy because of the Stock Markets link to the economy, but it was not the sole cause. It merely highlighted America’s poor economic structure. The overlying cause was the undersupplied distribution of income. Such a small number of citizens were able to save vast amounts of money and own a substantial amount of stock that the Crash didn’t directly affect the majority of the population; laborers and farmers. It was the wealthy businessmen and landowners’ inability to remain funding the production of goods and employees wages that directly had an effect on the working class.
ReplyDeleteThe Stock Market Crash was a cause in the depression, but it is only a main cause when placed along other causes such as the maldistribution of wealth and the weak structure of the economy. When looking back one can see that the market had been slowly spiraling downward, and some use this information to help argue that it was not a major cause in the depression. However the people currently living in the 1920's did not see this slow downward spiral. The stock market crash came to them as a shock, which caused them to be fearfull of investing. The economy relied on confidence and the crash took this confidence away. However other than having a psychological impact which then affected people's actions on spending and saving, it was not a major cause. It can only be said to have been a major cause if looked at with the maldistribution of wealth, the fact that production was outpacing consumption, and the weak structure of the economy to begin with.
ReplyDeleteBased on the articles, I can say that the stock market crash was more of an event that occured due to more contributing factors that led to the depression instead of it being the reason why the depression occured. McElvaine says that a main reason was the distribution of wealth before the crash that led to underconsumption and oversaving when the market crashed, making it impossible for it to recover. Garraty also agrees with this, saying that the economy of the United States was already going down hill in the summer of 1929. The stock market crash seemed to push America into a deeper hole than where it was, but the fact is that America was already in that hole, and so the stock market crash cannot be blamed as the single cause of the Great Depression.
ReplyDeleteThe Stock Market Crash was not a cause of the Great Depression, rather a SYMPTOM of it. The Stock Market crash confirmed the already deteriorating economy. Although it accelerated the public fear while simultaneously decreasing public insecurity regarding the economic status of the country, these effects of the stock market crash had little to do with the fundamental problems with the economy at the time. It was a signal of the end of the "good times"
ReplyDeleteThe four main theories that explain the causes of the Great Depression do not cite the Stock Market crash as a fundamental piece of evidence. If it was significant, major historians would have discussed that in their theories.
More so, a similar crash took place in 1962 were $20.8 billion dollars was lost, but another depression did not ensue.
The stock market crash that occurred in 1929 was an indicator of the Great Depression, and to no extent a cause.
Though iconic, the Great Crash of 1929 was not the major cause of the Great Depression.
ReplyDeleteBefore the Great Depression, during WWI, farmers experienced higher demands for agricultural products, especially wheat. To meet these demands, U.S. and Canadian farmers would buy more land and increase productivity. This method worked, during the war.
Upon the end of WWI, both the United States and Canada were exporting their agricultural products and filling foreign demand. The newly formed Soviet Union entered the scene along with Australlia.
The resulting surplus of wheat demanded action. In 1927 & 1928, the U.S House and the Senate attempted to pass the McNairy-Haugen Bill. It would have placed tarrifs on wheat, sold U.S. wheat internally, and made the United States buy up what was left to sell in the world market. President Coolige vetoed the bill both times.
Farmers were in trouble. Many, if not most, were taking out second mortages in order to maintain their way of life. When Hoover was President, he loaned 64 million dollars to farmers in order to try and support them.
Farmers had been struggling before the Great Crash.
The Bull Market experienced a surge in 1927. During that time, stock prices were inflated tremendously. Stocks were being traded at 6 times their actual earning. Brokers were giving out loans that allowed perspective buyers to buy on credit. These unsafe trading practices lead to a loss of 4 billion dollars on the 28th of October, 1929. This loss was detrimental for many, but maldistribution of wealth meant that only a small percentage of the population was directly effected. Farmers had little to fear, but investors did.
The Great Crash could have been a symbol of what was to come, but not the main cause because of the small percentage that were effected.
In all, the extent of its damage was psycological. Other factors would eventually lead into the Great Depression.
The stock market crash signaled the beginning of the depression, even though historians see it now as just a typical'panic', and the market had rebounded back to where it was in a short period of time. however, the psychological impact of the crash led many people to think it was worse than it was, which made especially investers fearful in investing their money into the econony, causing an even greater depression. the length of the depression was due to extremely hesitant spending by banks(Those that did not bankrupt)and investers in other businesses, causing more unemployment, but the amount of necessary spending to get the country out of the depression only occured in preparation for war, the event that got the Us out of the depression. although the crash marks the beginning of the depressioin, and lead to psychological factors that deepened the depression, it was not a direct cause.
ReplyDeleteThe Great Crash of 1929 may have been a harbinger of the rough economic times ahead, yet in itself, it had little economic impact; its impact was on the American consumer. The impact on the consumer caused the system of extreme consumption of the 1920's to come to a screeching halt. Only in this way can the Great Crash be called cause of the Great Depression.
ReplyDeleteThe Crash indeed devastated the New York Stock Exchange, losing over 228 points on the Times Industrial Average; stock prices plummeted. However, prices rebounded in November 1929 and April 1930. The market had essentially healed itself. The Crash decreased production by 9%, a relatively small number in comparison to the rates of cut of the following years.
The psyche of the American consumer may have had more of a key role in the beginning of the Depression. The Crash significantly reduced consumer confidence. This caused less product to be purchased in an economy that was already overproducing; the surplus was not being bought, yet with only a 9% cut in production, production continued and prices plummeted.
Consumers were saving more and spending less. Banks were not being supplied with enough capital to sustain themselves, and the American banking system collapsed in 1933. The consumer was not spending their money as a result of seeing what had happened during the Great Crash.
When the United States, being a global commerce leader, experienced the fall of its economic system, the rest of the world was drawn into the depression, as McElvaine correctly states. This fail was the result of the decreased consumer confidence which forced American goods, and American spending to plummet. The world's depression in turn caused the US' depression only to deepen.
The Great Crash of October 1929 had little impact on the actual economy of the US. However, the affect on consumer confidence set into motion a pattern of American spending which contradicted the economic atmosphere of the 1920's. This caused that system to collapse which began the Great Depression.
McElvaine's comparison of the Crash to that of a cold is a perfect descriptor of its relationship to the ensuing Depression. While it definitely signaled the beginning of the Depression, it also definitely was not the cause. Instead it exposed the underbelly of America's deteriorating economy, where poor Republican Economic policies and a severe maldistribution of wealth were the real culprits.
ReplyDeleteBy then end of the Roaring Twenties, the top 1% of Americans had seen a 70% rise in disposable income. Yet, 80% of Americans had no savings at all. Still, corporations kept producing while no one could afford their products. These numbers are very indicative of a weak economy. They also show that the Crash directly affected only 1% of the population. The majority of America's pockets were hardly touched. Instead, the crash caused a scare in the general public that only hacerbated the lack of spending already going on.
The fact that most historians do not credit the Crash with the cause of the Depression adds great strength to this argument. It was not the sudden and shocking fall of the Bull Market that led to the Depression; it was the slow and unseen holes in America's economy that finally grew to big to handle.
The Stock Market Crash was a lead in to the Great Depression and not the sole cause as most believe. One can see how people at the time would believe that it was a main cause to the Depression, because of the effect that the crash had on the American people, due to the Stock Markets link to the economy. So the crash was one of the contributing factors to the depression. It highlighted that America had a poor economic structure. The overlying cause were also the maldistribution of wealth as McElvaine argues and the poor, weak state of the economy, and the structure that went with it. The economy had been spiraling downward and the American people did not see that. So the crash was a shock. Which caused them to be fearful of investing and spending anymore. The economy relied on the confidence and that was now gone. The fact is that the crash can only be looked upon as a major cause when looked at with the maldistribution of wealth, and the fact that production was outpacing the consumption of products and with the weak state of the economy.
ReplyDeleteThe Stock Market Crash of 1929 cannot be said to be a major contributing factor to the Great Depression which it preceded, but rather the uncovering of a great wealth problems that actually caused it. These problems include the maldistribution of wealth, as well as the generally poor economic structure. The maldistribution of wealth is described as "the most important factor in the great paradox of the Depression", by McElvaine. This is a very apt statement for describing the importance of this major contributing factor. When the investors lost confidance, the economy collapsed because they were the ones who had the money. Therefore, the Stock Market Crash cannot be said to be a very influential cause of the Depression.
ReplyDeleteI believe that the wall street crash was one of the causes which led to the Great Depression, however it was not the main cause. The wall street crash led americans to sell all their stocks, and at this time only 14% of americans remained in the stock market. Before the great wall street crash of 1929 money was becoming less and less for farmers and other small business owners, the crash had only worsened the situation for many americans, after the crash other events took place which soon led to the development of the great depression. In my opinion all of these events added up together created the great depression.
ReplyDeleteThe Wall Street Crash in 1929 was an ominous event that had created fear and uncertainty in the American citizens, but even so, the Wall Street Crash can not be accredited as the main cause to the Great Depression.
ReplyDeleteThe Crash was a reality wake up call from the Roaring Twenties to the American citizens, which is why this event gets so much hype; the Americans were used to the grandoise lifestyle that the Roaring Twenties provided, and now it seems as if the economy is falling out. But, truly, "scholars generally agree that American stock prices were not unreasonably high in 1929 and that the stock collapse had little effect on the level of industrial activity in the United States. No effect, that is, except psychological" (Garraty). Garraty is suggesting that the Stock Market Crash did not have the severity to affect the industrial activity into a downward spiral, but what the Stock Market did do was create a psychological scare that brought doubt and uncertainty to the American people.
MacElvaine states that "when someone becomes ill after 'catching a chill,' it is not the cold itself that causes the sickness. Rather the cold reduces the body's resistance to microorganisms alredy present in it, which then are able to cause the illness. Some such role is the proper one to assign to the Crash." What MacElvaine is suggesting, is that the Stock Market Crash was like a cold in the United States; this cold made the citizens weary to make any investments and to hoard their money (which contributed to the lowering prices). When society has a psychological scare, this is one of the biggest downfall to the country because people are willing to spend and sell more if they're confident, but if they're not, like in 1929, they will save their money and keep to themselves, which is a downfall to any economy (maldistribution and underconsumption).
So, ultimately the crash was just an underlying event that the Great Depression is comprised of, but not made of.
The stock market crash was very important beginning of the great depression becase of the short term effects but in long term status i didn't play that big of a role. I believe the main casue of the Great Depression was the maldistribution of wealth and the polices the goverment held. McElvaine makes the point in his essay that it was the maldistribution that was the main cause. The polices also played a role in this because of polices ideas of giving more money to the rich through the form of tax cuts while they gave little cuts to the middle and poor classes. The government did hope that these tax cuts would give more money to the rich so they could invest it back into the economy but they didn't do this so nothing changed and the economy got worse. call it ignorance or bad luck it was the governments actions that lead to the great depression and the stock market crash was only a result of their bad policies.
ReplyDeleteWhen people look back upon the Great Depression years, the Stock Market Crash is the first event that will pop into people's minds. The Great Depression is in fact a complex issue that likely is a culmination of various factors coming together. In the summer of 1929, prior to the stock market crash, total spending had already begun to decline showing that the Stock Market Crash was not the sole reason. However, the crash probably did exacerbate the inefficiencies of the current economic system by creating fear among investors and consumers alike. The economy was built on consumer spending, and when the consumer heard of the news they became more fearful of buying. Then there was a ripple effect to the business who did not want to invest in new equipment or new employees. This is shown through the fact that American imports dropped 20% from September to December. Another important factor, as already mentioned earlier, is the maldistribution of wealth. The wealthiest 1% had the highest share of the income in 1929 than any year since. The wealthy had all the disposable income. However, they can only spend so much until they run out of items to purchase, as we found out in our class simulation. I agree with McElvaine that this was probably the most prevalent cause. So, in retrospect, the Great Depression was not caused by the Crash, however the crash probably sped up the rate at which the country's economy was spiraling downward.
ReplyDeleteThe stock marcket crash was definately not the leading cause of the great depression. During the 1920's many Americans invested in duable goods. Durable goods were....durable and would not have to be replace frequently. This caused many businesses to loose demand and therefor didnt need as many workers. Many factory workers were let go from their job, reducing the amount of money that was going into the economy. This became a ripple effect further reducing the amount of money in the economy. The stock market crash was just the cherry on top rather than the sundae.
ReplyDeleteBlack Tuesday was a contributing factor to the depression the U.S faced in the 1920's, however, it is not a long term or significant factor. It did act as a milestone revealing the steady decline in the economy. The greatest effects of the stock market crash were then induced because of the scare it created bringing about a combination of bad loans, bank rushes, and the failure of the gold standard. The fall of the economy was foreseeable because of the skepticism but mostly because of the over production of durable goods that lead to the over extension of funds, depletion of jobs and negative stimulation attempts. The greatest theories cirrculating about the causes of the great depression are rooted in the imbalances of wealth, lack of government involvement and the isolated market that lead to a great recession around the world.
ReplyDeletecameron steffey.
ReplyDeletethe great depression was started by the stock market crach, but the stock market crash was not the main reason for the great depression. the stock market falling scraed people and they did lose money but when people started pulling there money out of the stock market and the backs in collopsed even harder around them. once the stock market fell, no body bought anything, no one put there money in stocks or the bank for lack of trust, the dust bowl and not most farmers out. so the stock market crash was the cause for the great depression, but it wasn't why it lasted for so long.