What Caused The 1929 Crash Of Stock Market Prices
Below is a MRR and PLR article in category Master Series -> subcategory Personal Finance.
What Caused the 1929 Stock Market Crash?
The 1929 stock market crash was an unprecedented event that caught investors off guard at the close of the exuberant Roaring Twenties. While market corrections are expected, nothing prepared the public for the late October crash, which triggered a prolonged economic downturn known as the Great Depression.
The crisis began on Thursday, October 24, 1929, and worsened over the following Monday and Tuesday. Over the subsequent month, the market continued its downward spiral, leading the United States into a depression that took over 25 years to overcome. It wasn’t until November 1954 that stock prices returned to their pre-crash levels.
But what caused this disaster? Opinions vary, but the consensus is that there was a misplaced belief in the sustainability of high stock prices. The bull market of the 1920s prompted prominent economist Irving Fisher to famously declare that "stock prices have reached what looks like a permanently high plateau."
At the time, the stock market frenzy swept the nation. Investing became a widespread trend, attracting individuals who had little understanding of market operations. Many even borrowed money to buy more stocks, driven by the belief that prosperity would continue indefinitely. They ignored warnings, fueling a speculative bubble that defied logic.
Inevitably, speculative booms are unsustainable. As the market overheated, it peaked in early September 1929 and began a steep decline, losing 17% of its value over the next month. Although prices briefly rallied out of hope rather than reason, the final collapse occurred as savvy investors cashed out their profits. This marked the crash in global stock market confidence and the onset of the Great Depression.
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