The belief that stocks were overvalued in the late 1920s effected the American economy by causing the Wall Street Crash and the Great Depression in the 1930s
When talking about investments we must consider that everything that happens on the stock market is based on events or speculation, the stock markets definitely did not crash all of a sudden.
In the decade of the 1920’s, there was a huge rise in bank loans in the United States. The market was way overvalued, and people had false expectations
Prior to 1929, the market gave so much potential for being overvalued, which triggered people to buy a lot of shares based on unrealistic expectations. Even loaned money was used to buy even more shares, expected to gain a higher profit. In the end, prices were not much driven by any other economic factors than blind optimism.
An Overview of the Great Depression by Jessica McBirney 2017 is quite an interesting reading which explains in a brief yet complete way the causes, the consequences, as well as the genera situation lived during the Great Depression from 1929 to 1939 in the USA.
In the reading by McBirney, the only topic that was not discussed in the articles is:
Mostly children took advantage of the opportunity to utilize entertainment
