Stock Markets Exposed
What was the cause of the 1929 stock market crash?
i dont understand the whole point of the stock market crash please help?!?!?!?!
Public Comments
- it was mostly rumorslike everyone heard they wernt gonna get there money and so they ran to the bank and with drew it therefor cauisng the banks not having any money to give people who invested their money ... ::stanley
- well everybody started to sell their stocks so the price went down....they were just paranoid i guess.
- ok, well in 1929, you could make purchases of stock using what is pretty much a older version of a credit card. so insted of the company actually getting cold hard cash, they were getting IOU's for parts in their company. people would do this because they figured that if i put 50$ into this company, i will easily get that back and be able to pay off the share i put on credit. so if their company died out a little bit, or lost value...all the people who had IOU's with the company were not able to pay the credit off they used to buy stock. so companies who were worth say, 1000$ dollars actually onl had maybe 300$ in actual cash, the rest in IOU's. and a company cant run on IOU's, they have to have cash. so all these companies who thought they had so much cash, really didnt....but the market was just inflating so much because of all the IOU's people were making, insted of cash. there was alot of money used and there wasnt the money there to back up the spending, causing it to crash IOU i owe you
- There were several factors. First, the world economy was rocky due to the aftermath of World War I. Germany was bound by the Treaty of Versailles to pay war repartition's to the British and French. Inflation was very high and the Germans borrowed a lot of money, with American banks being some of the biggest lenders to Germany, France and Britain as well. In the U. S., the boom of the Twenties seemed like it would never end and many people wanted to invest, even those who didn't have ready cash. Securities laws at the time allowed stocks to be purchased on margin. This meant that they could "buy" the stock with just a small percentage of the share price down and would pay the margin off when sold for a profit. When the effects of the world wide recession hit, U.S. money sources began to tighten as loans to foreign nations were called in but many were defaulted upon. The result was a drop in the stock market that sent investors panicking and when many of the margin shareholders were called to pay the margin, they were unable to do so and many of them went bankrupt. The outstanding margins on so many stocks made the shares virtually worthless and thus led to the famous crash of 1929 and the Great Depression.
- buying stock on margin basicly buying stock with money you dont have
