The Great Depression (1929-1930)

The Great Depression

The Great Depression or the Stock market crash of 1929 started in 1929 and ended in the 1930s. While the Great Depression hit North American and Europe the hardest, other cities worldwide were affected just as much. It was the start of the Second World War that put an end to the devastating effects caused by the Great Depression.

The Great Depression Causes

Causes of the Great Depression have been discussed by scholars and economists every since. Life during the Great Depression was hard and effects of the Great Depression lasted way after the World War II started.

Unemployment during the great depression was at record high. Many people who remember the time of the Great Depression still worry when investing in the stock market nowadays.

Although, scholars have not totally agreed on the causes of the Great Depression, there are enough theories about why the Great Depression occurred, whether the Great Depression will occur again or how to prevent an event similar to the Great Depression of 1929 from happening again.

Among theories of what caused the Great Depression are: orthodox classical economics theory of the Great Depression, monetarist and Keynesian view on the Great Depression, Austrian economic and neoclassical economic theory of the causes of the Great Depression, Structural theories of the Great Depression, and so forth.

Changes over time in the nature of employee pension plans

Changes over time in the nature of employee pension plans have encouraged people to learn about, and eventually accept, stocks as investments. The most revolutionary change in these institutions in the United States has been the expansion of defined contribution pension plans at the expense of defined benefit plans.

Growth spurt in the mutual fund industry

The stock market boom has coincided with a peculiar growth spurt in the mutual fund industry and a proliferation of advertising for mutual funds. In 1982, there were 6.2 million equity mutual fund shareholder accounts in the United States, about one for every ten U.S. families. By 1998, there were 119.8 million such shareholder accounts, or nearly two accounts per family.

A lower inflation rate

High inflation is perceived as a sign of economic disarray, of a loss of basic values, and a disgrace to the nation, an embarrassment before foreigners. Low inflation is viewed as a sign of economic prosperity, social justice, and good government. It is not surprising, therefore, that a lower inflation rate boosts public confidence, and hence stock market valuation.

Higher equity turnover rate

The higher equity turnover rate may be symptomatic of increased interest in the market. According to a study by the SEC, there were 3.7 million online accounts in the United States in 1997; by 1999 there were 9.7 million such accounts.

Dramatic increase in gambling

There has been a dramatic increase in gambling opportunities in the United States in recent years.

This section of the Great Depression website examines factors affecting the market during stock market crashes including the stock market crash of 1929. The Great Depression was by no means caused by any single factor.

It is all the factors together that caused the stock market crash of 1929. Set forth below is a list of factors that may help explain the present speculative market, mostly factors that have had an effect on the market that are not warranted by rational analysis of economic fundamentals:

Internet and the World Wide Web

Internet and the World Wide Web have invaded investors’ homes during the second half of the 1990s, making the population intimately conscious of the pace of technological change.

The U.S. appears to occupy a leadership position

In many areas of activity, the U.S. appears to occupy a leadership position, and therefore it starts to seem only natural that confidence in the premier capitalist system would translate into confidence in the market, and that the U.S. stock market should be the most highly valued in the world.

Significant rise in materialistic values

The bull market has been accompanied by a significant rise in materialistic values. It is plausible that materialistic feelings might influence investors’ demand for stocks, which have long held out at least the possibility of amassing substantial and quick riches.

Anything I Missed?

So this is the Case Study of The Great Depression of 1929.

There you go guys, now you know what happened at that time and if you are wondering :

What happened after the Great Depression of 1929? Then Check this article.

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