Why did the stockmarket crash of 1929 effect the lives of people who didn't own stocks?

Question

i have to write a paper for school, and i still don't get why the stock market crash would have effected the lives of people who didn't own stocks.

Answer 1

The boss lost stock.......so the employees who worked for him/her were severelly affected. The rich people became poor and it passed down the line.

If you have a big financial setback as an employer, the first area you are going to cut back on is the employees - thus they were affected.

Answer 2

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Why did the stockmarket crash of 1929 effect the lives of people who didn't own stocks?
i have to write a paper for school, and i still don't get why the stock market crash would have effected the lives of people who didn't own stocks.

Answer 3

Classic trickle down economics. Only this case, it wasn't a trickle, it was Niagara Falls.

The stock market crash caused many businesses to fold. That meant the people working for those businesses were now out of a job (whether they held stock or not). Since they were out of work, they couldn't afford to buy things. That meant the stores and businesses they (the former workers) used to patronize were then not getting as much business. In some cases, that meant they (the stores and shops) had to close - and lay off more workers.

This says nothing of the suppliers of the businesses that closed, the buidings they rented offices in, the train tickets they bought to commute to work, etc.

And so on, and so on, and so on ...

Answer 4

The 1929 crash was a triggering event for the Great Depression.

Answer 5

The stock market crash of 1929 had a domino effect and washed across the country. Whether you owned stock or not, you could not escape its effect. Please read below.

1929 - The stock market crash ushered in the Great Depression.

What made the stock market crash? Here's a brief summary.

Capital is the tools needed to produce things of value out of raw materials. Buildings and machines are common examples of capital. A factory is a building with machines for making valued goods. Throughout the twentieth century, most of the capital in the United States was represented by stocks. A corporation owned capital. Ownership of the corporation in turn took the form of shares of stock. Each share of stock represented a proportionate share of the corporation. The stocks were bought and sold on stock exchanges, of which the most important was the New York Stock Exchange located on Wall Street in Manhattan.

Throughout the 1920s a long boom took stock prices to peaks never before seen. From 1920 to 1929 stocks more than quadrupled in value. Many investors became convinced that stocks were a sure thing and borrowed heavily to invest more money in the market.

But in 1929, the bubble burst and stocks started down an even more precipitous cliff. In 1932 and 1933, they hit bottom, down about 80% from their highs in the late 1920s. This had sharp effects on the economy. Demand for goods declined because people felt poor because of their losses in the stock market. New investment could not be financed through the sale of stock, because no one would buy the new stock.

But perhaps the most important effect was chaos in the banking system as banks tried to collect on loans made to stockmarket investors whose holdings were now worth little or nothing at all. Worse, many banks had themselves invested depositors' money in the stockmarket. When word spread that banks' assets contained huge uncollectable loans and almost worthless stock certificates, depositors rushed to withdraw their savings. Unable to raise fresh funds from the Federal Reserve System, banks began failing by the hundreds in 1932 and 1933.

By the inauguration of Franklin D. Roosevelt as president in March 1933, the banking system of the United States had largely ceased to function. Depositors had seen $140 billion disappear when their banks failed. Businesses could not get credit for inventory. Checks could not be used for payments because no one knew which checks were worthless and which were sound.

Roosevelt closed all the banks in the United States for three days - a "bank holiday." Some banks were then cautiously re-opened with strict limits on withdrawals. Eventually, confidence returned to the system and banks were able to perform their economic function again. To prevent similar disasters, the federal government set up the Federal Deposit Insurance Corporation, which eliminated the rationale for bank "runs" - to get one's money before the bank "runs out." Backed by the FDIC, the bank could fail and go out of business, but then the government would reimburse depositors. Another crucial mechanism insulated commercial banks from stock market panics by banning banks from investing depositors' money in stocks.

Answer 6

because commodities prices dropped as did bank stock etc.

you need to understand that people who lost big were those who could afford to invest in the market, they were also the ones who who paid the wages of the people who worked at their factories, stores etc.

There were masses of people who dabbled into the stock market because of the growing profits every year were huge, even mum and dads that had enough money put it into the stock market to make a quick return on capital, unfortunetly the bubble burst and these people along with those thousands now out of work were left without money and with basically no assets.

hope this helps

Answer 7

What got hurt was the economy in general. Many people at the time had lost money in stocks and were in debt. So they stayed home more and bought less. Because of lack of business, owners of places had to lay off people to keep a profit. In turn, those unemployed people now spent less until even more people had to be fired. It was a downward spiral that kept getting worse and came to affect everyone.

Answer 8

Because it effected the companies that people worked for, causing them lack of access to such things as bond sales, stock sales and nearly all business activity. There for they became money tight, not hiring, and firing left and right. You can see how this effect the average working citizen who lived pay check to pay check. This in the end caused everyone to tighten their belts and quit spending. That caused the depression to increase in severity.