How did The Great Depression occur?
In: Economics
The post war boom after world war 1 led to a great economic expansion. Many people started investing into the market which created hyper-inflated stock values. People were under the impression that stock prices would keep going up forever. So, everyone, and I mean anyone with any money, was invested in the market. The Federal Reserve warned that speculation was dangerous. Some people freaked out and started pulling out cash which created a dip in the market. Essentially, every freaked out and started pulling money which led to decreasing stock values until they were worthless. The difference in the cost of an given stock and 0 was how much each person lost per share. Basically, peoples life savings were completely wiped out and went from riches to rags overnight. The instantaneous lose of money stopped everything in it’s tracks. Business had less customers and the couldn’t keep paying for workers. Less workers less customers. That cycle continued into the Great Depression.
Similar to the 2008 collapse with one major exception; the banks were selling loans to people that they knew could never pay up. Instead of people’s money be lost on bad stocks they were lost on bad securities. That DEPRESSION was totally caused by the ‘financial institutions we can trust!’.
But don’t trust me! Verify on Wikipedia:
[https://en.wikipedia.org/wiki/Great_Depression](https://en.wikipedia.org/wiki/Great_Depression)
[https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929](https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929)
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