The Wall Street Crash
Created @May 17, 2025 8:43 PM
Class History
Overview
The Wall Street Crash of 1929, also known as the Great Crash, was the most
devastating stock market crash in U.S. history. It marked the beginning of the
Great Depression, a global economic crisis that lasted throughout the 1930s.
The crash had far-reaching consequences, not only in America but also in
Europe and across the world.
Causes of the Wall Street Crash
1. Over-speculation and the Stock Market Bubble
During the 1920s, known as the Roaring Twenties, there was rapid
economic growth and speculation in the stock market.
Many people invested heavily in stocks, believing prices would keep rising.
Buying on margin: Investors bought stocks with borrowed money, only
paying a small percentage upfront.
Stock prices became over-inflated and detached from the actual value of
companies.
2. Overproduction in Industry and Agriculture
Factories and farms produced more goods than could be sold.
Unsold goods led to falling prices and declining profits.
3. Uneven Distribution of Wealth
The gap between the rich and poor widened.
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Most Americans could not afford the goods being produced, causing
demand to fall.
4. Weaknesses in the Banking System
Many small banks were poorly regulated and heavily invested in the stock
market.
Banks made risky loans that could not be repaid when businesses failed.
5. Loss of Confidence
In October 1929, stock prices began to fall.
Panic selling caused prices to plummet.
Black Thursday (October 24, 1929) and Black Tuesday (October 29, 1929)
saw massive sell-offs of shares.
Consequences of the Wall Street Crash
1. Collapse of the Banking System
5,000 banks failed between 1929 and 1932.
Millions of people lost their savings.
2. Unemployment and Poverty
By 1933, 25% of Americans were unemployed (about 13 million people).
Factories closed, and businesses went bankrupt.
Families lost their homes and were forced to live in makeshift camps (called
"Hoovervilles").
3. Decline in Global Trade
Protectionism: Countries imposed tariffs (e.g., Smoot-Hawley Tariff, 1930)
to protect their own industries, but this worsened the global depression.
International trade fell dramatically.
4. Impact on Germany and Europe
The U.S. had loaned large amounts of money to Germany to help pay
reparations from WWI (Dawes Plan).
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After the crash, U.S. banks demanded repayment.
German economy collapsed: Unemployment soared to 6 million by 1933.
Extreme poverty and social unrest led to the rise of extremist political
parties, including the Nazis.
Life During the Great Depression
1. United States
Soup kitchens and breadlines provided food for the hungry.
Shantytowns (Hoovervilles) were built by homeless people.
Families suffered from malnutrition and poor living conditions.
2. Germany
Municipal lodging houses were overcrowded with unemployed men, as
described by Heinrich Hauser.
People faced long lines for food and shelter, reflecting severe social
distress.
Political instability increased, contributing to the collapse of the Weimar
Republic.
Key Responses and Impact
1. U.S. Government Response
Herbert Hoover, president at the time of the crash, believed in "laissez-
faire" economics (minimal government intervention), which worsened the
situation.
Franklin D. Roosevelt's New Deal (1933 onwards):
Created public work programs to provide jobs (e.g., CCC, WPA).
Introduced financial reforms (e.g., FDIC to protect bank deposits).
Social security systems for the elderly and unemployed.
2. German Government Response
Initially cut public spending, worsening the crisis.
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Rise of extreme political movements, especially the Nazis, who promised
to restore Germany’s economy and national pride.
Key Facts and Statistics
U.S. stock market lost $30 billion in value within days.
Industrial production in the U.S. fell by nearly 50% between 1929 and
1933.
World trade dropped by over 60% due to tariffs and protectionism.
In Germany, unemployment reached 6 million by 1933.
The Great Depression lasted roughly 1929 to 1939, ending as countries
prepared for World War II.
Final Assessment: Why Was the Wall Street Crash
Important?
1. Trigger for Global Depression
The crash did not cause the depression alone but triggered a collapse of
economies worldwide.
2. Political Consequences
Economic hardship led to political extremism and the rise of totalitarian
regimes, especially Nazism in Germany.
3. Social Impact
Widespread poverty, unemployment, and homelessness.
Shift in government policies towards more interventionist and welfare-
oriented approaches.
4. Long-term Economic Impact
Reforms in banking and financial sectors.
Shift away from unregulated capitalism towards greater government
control and regulation.
Key Terms to Remember
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Wall Street Crash: Sudden collapse of U.S. stock market in 1929.
Great Depression: Global economic crisis that followed.
Speculation: Risky investment in hopes of high returns.
Buying on margin: Purchasing stocks with borrowed money.
Protectionism: Tariffs and trade barriers to protect domestic industry.
Hoovervilles: Shantytowns for the homeless.
New Deal: Roosevelt’s economic recovery program.
Hyperinflation: Extremely rapid and out-of-control price increases, seen
earlier in Weimar Germany.
Extremism: Rise of radical political movements like Nazism.
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