Tuesday, June 15, 2010

The Stock Market Crash

by Angus T.

I am going to attempt to write an article on the stock market crash of 1929. I will talk about who was involved and affected, what actually happened, where the crash started, what places were affected, and how it started, in roughly that order.

The Stock market crash on Black Tuesday affected the entire western world. Stocks in almost every country lost their value. Most stocks dropped so far that almost everyone who had invested lost everything.

A stock market crash is when the prices of stocks decrease dramatically. This happens when there is not enough demand for stock. When stock is in high demand and many people are trying to buy it, it costs more. When it is not in demand and few people want it, it costs less. A crash happens when no-one wants to buy stock, and the shares become almost worthless.

The stock market crashed famously and spectacularly on October 24, 1929. This is the legendary Black Tuesday. In the days leading up to the crash, the market was very unstable.

The stock market crash started on Wall Street, Lower Manhattan, New York City. From there it spread throughout the western economy, bringing almost every market to its knees.

What caused Black Tuesday? In the 1920s, the overall attitude was that the stock market could keep its bull market indefinitely. This led many Americans to get loans from banks to buy stock, which lead to a money shortage in the banks. In order to regain money, the banks called in loans from companies. They just told the companies to give their money back. The companies did not have the money to pay off the loan immediately, so were forced to file for bankruptcy. When a company goes bankrupt, its shares become worthless. All the people who had loans in order to buy the stocks lost everything.

People just kept buying into the stock market, buying more and more stocks. This lead to what can be thought of as some sort of stock market bubble. When the banks ran out of money, the bubble popped.



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