First let me say I could find no ohter category to put this question in, so please forgive me if it's .?

Question

in the wrong one. But I've always wondered what started the great depression. I know the stock market fell. That means prices went down, right? (I wish gas prices would go down) but at any rate, does anyone know what caused the market to fall? Was it a rumor about bad bananas (LO!!)? I mean, what was it that caused the market to fall in the first place?

Answer 1

The stock market was going through the roof before the depression. People were so happy because they could buy stocks in the morning and sell them later that day at a huge profit.

So, people started buying stocks "on the margin", or in other words, the stock brokers were allowing people to run up a tab on their stock purchases, because selling the stock at a higher price "always" happened. The stock broker would get paid back (from money that was put on somebody else's tab), and the buyer turned seller kept the profit (which was not in cash, it was more credits from other people's borrowed money.

Then one day something happened. Somebody figured out that if people stopped buying stock, just sold it, and tried to get the cash, it would take a trail a mile long to get it from loaner to borrower to loaner, borrower, loaner, borrower, etc. It was possible that there was more credit than cash. People caught on to the idea and started selling their stocks and not buying anymore.

Stock brokers tried to get money from all the people that had tabs. Those people couldn't get money for their stock. Fear and panic drove the prices of all the stocks to almost zero. The people who were left holding the bag were devistated. Some people started jumping out of window.

Companies started laying off workers. Workers started leaving their families. Families started losing their homes. People stopped buying goods, so more businesses went out of business.

When WWII started, the government needed workers and soldiers. Things started to turn around.

Nowadays they have controls on the stock market. If prices start to plummet, the computers will freeze trading. This gives people to take a breath and not panic.

There are also strict laws from the FTC that prevent "buying on the margin" past a certain point.

Answer 2

Buying stock "on the margin", people were allowed to pay something like 20% of the cost for stock shares but collect 100% of the value. Eventually everyone tried to collect and not enough real money was there.

Answer 3

Just hit the links below you can find everything about it there.

http://www.spartacus.schoolnet.co.uk/USAwallstreet.htm

http://www.bbc.co.uk/schools/gcsebitesize/history/mwh/usa/walldepressionrev1.shtml

http://www.historylearningsite.co.uk/wall_street_crash.htm