1920's Spring Break Blog

The 1929 Stock Market Crash was a result of various economic imbalances and structural failings.  These are some of the most significant economic factors behind the stock market crash of 1929.

• Credit Boom
• During the 1920s, many people used credit and loans to buy shares from the stock market.  However, when 1929 came around, people were in debt and hastily sold their stocks to try and pay off their debts.  The stock market had crashed as a result of all the debt.
•    Buying on the Margin
• Buying on the Margin is the process of buying little and borrowing a lot from the share which made many people millionaires.  This process is similar to buying on credit since the stock purchase was based off of borrowed money from the bank.  Just like the Credit Boom, buying on the margin lead to the stock market crash.
• Irrational Exuberance



• One of the main reasons why the stock market crashed was because of false expectations. Many consumers saw the stock market's prosperity and seized their opportunity.  When consumers felt confident in their stocks and profits, they began to buy more stocks with the expectation of more profit.  Tejvan Pettinger argues that the force fueling the economy was not of economic processes, but of the consumer's confidence in the stock market.
• Mismatch between Product and Consumption
• Companies and industries developed new techniques to make production more efficient.  Ironically, this lead to stock market crash itself.  Since companies were now faster and more productive, they had to sell their products to make a profit.  But people were not buying their new products which hurt the economy.  
• Agricultural Recessions
• Farmers faced a real problem during the 1920s.  Similar to the large companies who could not sell their products, farmers could not sell their food.  Food was not in high demand, and the economy suffered.  Thus, the stock market was negatively affected.
• Weaknesses in the Banking System
• Banks and firms were numerous during the 1920s.  According to Tejvan Pettinger, "America had over 30,000 banks."  However, since the banks were so numerous, they were more vulnerable to bankruptcy; particularly those in rural areas which suffered from the agricultural recessions.