The Wall Street Crash: causes and effects

Causes of the Wall Street Crash Long Term Causes1. Overproduction in American IndustryBecause of new production methods, Industry was churning out goods which couldn't be sold. Therefore there was a drop in sales and profit.2. Wealth of 1920s not evenly distributed Even in 1929 millions didn't have cars and electricity bu Companies spent masses on advertising even though they were unable to increase sales. 42% lived below the poverty line Short Term Causes1. No Market for US goods in other countriesTwo factors meant companies couldn't sell their surplus goods. Firstly the Fordney-McCumber Act placed tariffs on foreign goods which led to retaliation from other countries. America's goods were too expensive for other countries to buy.2. Speculators 'Playing the Margin' with borrowed moneyIt became increasingly easy for people to get into the stock market . American's saw it as an easy way to get rich and more and more started 'Playing the market'. They didn't even have to  pay in full for shares they could borrow 90% and pay for 10% Immediate Causes 1. Panic Selling of Shares in October 1929 On the day of the crash sales prices were dropping rapidly which caused panic. Thousands of people were trying to sell there shares at any price meaning the cost of shares fell.This started a vicious circle of panic selling because people panicked they wouldn't be able to pay their debts to the investors who gave them 90% of the cost

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