Question

Why did the crash of wall street & the great depression happen in 1929?

Answer 1

They are two separate events. The crash of 1929 was caused by too many people having stock that they only owned 10% of. That is a very dangerous situation. Here's why.

When a market is going up, suppose you "buy" 100 shares of something at 10 dollars a share. That's 1000 dollars. Now suppose you say to your broker "I'll just put up 100 of that thousand. I'll borrow the rest." Your broker says fine. He gets the other 90 shares for you. You're on an up cycle and the stock goes up to 12 dollars. You let it ride. You're making money.

But what happens when the stock goes down to 9.50? Now your stock is 50 dollars away from you having lost everything you put in it. You want to sell, but your broker says don't. It's a good stock. Let it ride this downturn out. He's the expert, so you listen. You go to work and sometime while you're travelling the stock drops to 8.00. How you owe more money, When you get to work, you frantically phone and tell your broker to sell.

But he's sweating bullets too. He's lot many clients just like you and they all want to do the same thing as you do. You are willing to sell at any price which drives the stock down to 7.00. Now you don't know what to do -- you are 300 in debt.

Millions of people were going through the same thing at once. The banks were holding worthless notes. The credit system was being ripped apart.

That was one of the things that caused the market crash. Too much debt. Sound familiar? It should.
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The depression was another matter. At the time the market was falling apart and credit lines were being destroyed, the farmers were facing their own problems. You might want to think about watching the Grapes of Wrath. The farm land was being destroyed by incorrect farming methods. Since the banks were already in trouble, they had to call in some or all of their loans. The farmers couldn't grow anything, but even if they could no bank was willing to take a chance on loaning money out.

People lost everything trying to hang on,, but it was no use.