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Posted on 8 July 2012 | 4,791 views

The 1929 Stock Market Crash’s Effect on the U.S. Economy

The 1929 stock market crash devastated the American economy because not only had individual investors put their money into stocks, so did businesses. When the stock market crashed, businesses lost their money. Consumers lost their money too, because many banks had invested their money without their permission or knowledge.

The Great Depression soon followed. Even though the stock market crash of 1929 was one of the contributors to The Depression, it was not the only cause.

Factories had begun to overproduce consumer goods, but demand for those goods didn’t increase at the same rate. Prices of those goods began to fall, but once the stock market crashed, few people could afford to purchase goods.

A similar situation happened with farm crops as farmers planted more wheat than was demanded on the market.

Banks had little to no government regulations to abide by and lost many of their customers’ life savings in the stock market crash. Hundreds of banks failed over the course of the Great Depression, worsening the situation as many consumers were left with no money.

Herbert Hoover, who was President from 1929 to 1933, believed the government shouldn’t intervene with the economy. Rather, he said families could turn the economy around if they continue to work hard and rely on themselves.

In 1930, Hoover signed the Smoot-Hawley Tariff, which increased the tariff rates on imported goods. Foreign nations responded by boycotting American products. This severely hurt American producers who were in dire need of sales.

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