The Crash of 1929
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The crash of 1929 had many contributing factors, on of which was the interventions made by the American government. In the time period from 1924 to 1929 the Federal Reserve had raised the money supply by 20 percent, due to things such as the income taxes cuts promoted by Treasury secretary Andrew Mellon (Boyer 745). The growing availability and the increase in money circulation gave way to a game with stocks. The lacking of intervention from the government on trading regulations left the opportunity for informed wealthy buyers to driver up stock prices and then sell to unsuspecting investors, causing the bottom of the stocks to fall out, causing debt to grow and more money to borrowed to get ahead. The high hopes of getting rich quick and encouraging comments from Calvin Coolidge “Stocks cheap at current price”(Boyer 745), also lead to the increase of borrowing and inflation of goods prices. This “affected the prices of capital goods required for expansion” (Nash). This in return caused cost cutting, which brought about things such as reduced wages and over productivity. By 1929 Americans had accumulated a total debt of about 8 billion dollars due to the expanding purchases of stocks and automobiles.
The Great depression following the stock market crash of 1929 was inevitable; by mid-November of 1929 Americans had lost 30 billion dollars in the stock market bust and had provided foreign countries at war with over nine billion dollars in loans (Nash). The agricultural sector of the country had already been suffering for the past decade and the industrial sector was dealing with over productivity and insufficient wages for its workers (Boyer 745), leaving consumers with greatly decreased purchasing power and businesses struggling to break even. The Enduring visions textbook states that in “1929 the 40 percent of Americans who were lowest on the economic scale received only about 12 percent of the total nations income” (Boyer 745). The stock market also gave way to the perfect conditions to cause the banking system to break down, with all the lost money from the stock market crash, loans could not be repaid and banks were quickly being drained of all their funds by weary depositors, with fears of losing their money, causing investments and loans to come to a fault.
Although many not for the better, Herbert Hoover and his administration took many steps in hopes of improving Americas economy. Hoover pleaded to business men to keep wages at there current numbers and promoted for public work programs to be created. The Emergency Committee for employment was established to organize voluntary relief efforts and in 1931 some of the Nations largest banks agreed to loan money to smaller banks for loans to help stimulate failing businesses (Boyer 747). When national debt continued to grow Hoover approved the increase in in-come taxes which greatly hurt struggling