How Did The Stock Market Crash Lead To The Great Depression

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Due to the fact that the 1920's were a time of climbing economic prosperity, American businesses and their stocks were at unjustifiable highs and this ultimately led to the stock market crash in 1929. Several key factors were involved in the period that led up to, and eventually caused the crash and the Great Depression. Wild speculation by individual investors, businesses, and banks all led to the inflation of stocks, far beyond their actual value. Unbridled speculation, led to massive loan that were taken out, without a means of repayment without a return on the overvalued stocks. Without any type of government oversight or regulation, companies and businesses issued more of the worthless stock until the market could no longer sustain itself and it was revealed that the market did not hold the value it claimed to have. To see the end result (with the ability of hindsight), anyone could predict the government policies that were put in place, during the 1920s would lead to the economic crash. Starting with President Harding and later Coolidge both relied on Treasury Secretary Andrew Mellon to follow up on Harding’s promise of less government and bigger business. Raising tariffs for imports and lowering taxes for big business led to the economic boom of the 1920s. In addition to the …show more content…
What was perceived to be the invincible recipe for the economic success of the county, ended up being the same principles and practices that created the crash. Since the market was so strong, investors began to take unbridled risks in all areas of investing. This also led to unchecked expansions in credit limits, and loans (legal and illegal) that did not have any collateral and could not be repaid. Lazy real estate speculation and investments also led to overall collapse of the stock market. Banks themselves were using the deposits of the depositors to purchase, what ended up being, worthless
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