24 April 2023

What is the Crack of 29? – Discover the causes and consequences

By Donald

The Crash of 1929 is one of the worst events in the United States economy, which led to the Great Depression and world crisis. However, it also represented a lesson in how to handle the stock market and the stock market. So, in this article, we explain what the great depression is and the causes that led to the outbreak of the crisis. In the same way, the consequences such as the great recession or the low production of agricultural goods during the time are mentioned.

What is the crack of 29?

In the history of the United States of America, only a few events managed to threaten the nation’s status as a world power. One of them was a severe financial crisis that unleashed many consequences in the world economy. In this sense, this event is classified among the worst events in the country due to chaos, unemployment and even deaths that it caused.

The crash of 1929 consisted of a sharp fall in the stock market and the United States stock market. In this sense, the value of the wall street stock market it plummeted very quickly, reaching record levels. Said stock was at the highest levels, which attracted the investment of many people. However, in this event the prices fell precipitously, so the shares went on sale at low values.

This produced that investors did not buy anything and the crisis began there. The chain reaction was terrible, since it started poverty, unemployment and chaos in society. The market crash unfolded on the day October 24, 1929, what is known as Black Thursday. However, the crash of the 29th was not a one-day event, as it lasted for more than a month. Where the strongest falls were those of October 28 and 29, which are also known as Black Monday and Black Tuesday.

What were the causes of the crack of 29?

The causes of the crash of 1929 are varied and do not respond to a single isolated event, on the contrary, it was a set of events that accumulated. In this sense, it is worth mentioning roaring 20s, a decade in which the United States had great growth in its economy and industry. During this time people used to invest their savings to double their earnings.

In the events of World War I, the United States was one of the countries that later saw action. Therefore, this country had the function of the main exporter of industrial materials and food to other nations. However, the poverty of European countries caused them to stop buying food and tools, consequently, the export stopped. This led to excess supply and decreased demand.

In turn, the farm market It was not having its best moment, because there was a migration towards the industrial sector. All this caused many industrial goods to accumulate, but there was little production in the fields. So, both sectors had to lower their prices, which translated into unemployment in all items.

Why did the stock market crash in 1929?

The events that unleashed the stock market crash begin with speculation about profits, because with the passage of time, investors increased. However, investment was not real in most cases, because the bank made large loans. So, the person acquired a debt and the bank another debt.

The economy benefited from these actions for part of the decade, creating a financial bubble. However, by the end of it, the great recession began. In this sense, many banks they declared bankruptcy and on black Thursday the shares fell. The drop in prices induced thousands of investors to begin selling shares at rock-bottom prices to recover part of the money.

This speculation joined the other causes and started a fierce crisis in the world economy. Well, the crash of 1929 is considered one of the events that led to the great depression, which is a similar crisis, but with global consequences. The government under the Hoover administration It did not help to resolve the event either, on the contrary, it made it worse.

The government thought it was a temporary crisis, so it did not act against unemployment or the fall in prices. As regards agriculture, the state bought the brownfields, but could not keep up the expense of the high costs. So millions of farmers also went bankrupt and a period of famine began.

What consequences did the crack of 29 leave?

The Crack of 1929 had terrible consequences for the American population lower class, which was a few years in poverty. Similarly, this event affected the country’s economy, which could not fully recover until the 1950s. Many banks closed due to bankruptcy and some bankers committed suicide due to high debts.

  • One of the consequences was the deflation and great recession of the economy, that is, low values ​​in the actions, in addition to the prices of the goods.
  • low production of agricultural items.
  • Little internal consumption of industrial goods, which in turn caused a saturation of supply.
  • Rampant unemployment, where more than 100 thousand people they lost their jobs in the first three days of the crash of 1929.
  • International trade collapsed, as European countries stopped importing goods in the aftermath of the Great War.
  • Beginning of the Great Depression, a worldwide economic crisis that is considered one of the causes of World War II.
  • Hoover’s departure from the government through elections in which Franklin Roosevelt won, which proposed the New Deal in order to improve the economy.