Question

The causes of U.S Stock Market Crash of 1929:

1) Public Confidence

2) Federal Reserve policies

3) Misguided banking practices

Can you please talk about each of these causes (1-3) and how they caused the stock market to crash. please do not be to breif and be clear (preferly typed not write). Feel free to give an introduction before answering my question(this is optional you do not have to do the introduction). Thank you.

Answer 1

1) Public confidence-The US market was growing which led to the overconfidence of the consumers .The stock market increased by 20% after 1922 each year and this trend continued upto 1929 ie when the crash took place.The banks offered loans for building assets which the consumers availed ,as they were easily available.

2)Federal reserves policy--Lax economic policies contributed to the great crash. The FED was not willing to raise interest rate in response to rising share prices.So bank lending was going on which pushed prices high.Later when the banks took action , it was too late and the stock market crashed.

3) Misguided banking practices-Stock prices began to decline and panic set in . Investment companies and banks tried to stabilize the market by buying great blocks of stock.Stock prices collapsed completely .Billions of dollars were lost,wiping out thousands of investors . Prices continued to drop and US slumped into great depression.