The Causes of the Great Depression and Stock Market Crash of 1929.

Essay by bloodmoneyHigh School, 10th grade June 2003

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KQ: What caused the Great Depression?


Give reasons for the stock market crash of 1929.

"Map" the path from recession to the Depression.

Support a theory as to the cause of the Depression.

The stock market crash of 1929 was an event that virtually crippled the nation's economy, sending America into a state of panic and poverty. But the events leading up to --and possibly becoming the causes of-- the crash were what really would "make it or break it". Prior to 1929, the American people were engrossed in the stock market. It was a seemingly easy and quick way to make big bucks, and anyone could do it. Borrow some money on margin, invest it in a company, and make it big. Or was it really that easy? Little did the American people know, all of their buying on margin and using their house deeds or vehicular pink slips as barter was running the economy ragged.

The general idea behind the New York stock market was just this: people buy and sell stocks--"shares"--in the largest corporations. In owning a stock you own a portion of the company, and depending on whether the company did well or poorly, you would either be paid a dividend or possibly lose money. If company profit went down, the stock's value decreased, and vice versa if it went up. Of course, everyone wanted to have a part in the most profitable companies. From about 1921 onward, stock prices began to increase, but the real "mania" didn't start until about 1927. The stock market became an easy way to make big money; from either the dividends paid to you, or from the high prices that stock market gamblers would pay for your shares. An increasing amount of people began risking their money...