Реферат: The Economics Of The Causes Of The

investors’ stocks outright. The problem was that the people getting called simply didn’t have the money, or didn’t want to invest

it, forcing brokers to take a loss. This money was, of course, on credit and the banks were demanding payment to pay for the

losses they had sustained. The brokers simply didn’t have the money and were forced to default. This meant that the banks lost

billions of dollars of their depositors’ money, which the depositors were now trying to withdrawal. Once again the banks simply

didn’t have the money and were forced to go bankrupt. Between 1929-33 more than 10,000 banks failed, greatly shrinking the

money supply. The speculative boom had been built like an “Upside-down pyramid” on credit. Now it collapsed like one.

On Halloween Thursday the New York Stock Exchange closed and didn’t reopen until the following Monday. During

this, the second week since “Black Thursday,” prices fell still further in even larger selling frenzies. By mid November the

market had sustained an average $26 billion, or 40% loss. Some companies had seen their value drop from $100 to $3 per

share as little as two days.

The stock market crash started a chain reaction throughout our economy, and, indeed, the economy of the world. Since

most of the money was with the rich, and these were the people that had lost everything, spending declined very rapidly,

especially on luxuries. Contributing to the continued downfall was the fact that industry hadn’t shared its profits with its workers.

This meant that there was no mass purchasing power left once the rich lost out. Another contributor was the huge inventories

kept by many retailers. Since no one was buying no orders came in for many months, forcing businesses to layoff workers. Due

to the strong anti-union sentiment of the 20’s, there were no unions left to prevent the mass layoffs. Laying-off workers

constricted business’s markets still further until they were forced to lay off still more workers in an almost unbreakable

downward spiral. By the spring of 1939, six months after the crash, 4 million people were unemployed and this was only the tip

of the iceberg. By 1933 24.9% of the workforce would be unemployed. There would be an attempted military coup and the

US would finally go off the gold standard. The Great Depression had begun.

The foremost question in most people’s mind when thinking about The Depression is, “Can and will it happen again?”

When asked this simple question most experts agree that in our present economic situation something like The Depression

couldn’t develop. This is because the US passed many laws during the 30’s to prevent a stock market crash from re-occurring.

If something like The Depression started again federal bureaus, like the Securities and Exchange Commission, would step in

and attempt to prevent it. However, this is of little importance sine many of the causes of the 1929 crash are now illegal. First of

all commercial banks are no longer allowed to speculate in stocks. Second, the Federal Reserve now has greatly increased

power over interest rates. Which gives them much greater power to prevent a crash. Another factor that makes it less likely for

a crash to occur is the elimination of the big investment trusts, except the mutual funds, which are highly regulated. Incredibly,

the current tax system helps prevent a crash by spreading the wealth from the very rich to the poor. Unemployment