How The US Economy Was Affected By The 1929 Stock Market Crash

The stock market crash of 1929 demolished the economy of the United States because the individuals and businesses that had put in a lot of money in stock market investments lost almost everything. Even consumers who did not have anything to do with the stock market suffered from the crash because the banks which were supposed to protect their money invested these instead without their knowledge or consent. As a result, consumers lost a lot of money.

Other factors contributed as well to this devastating event. Factories chose to ignore the demand and supply principles and overproduce consumer goods even of the demand did not require for such a huge supply. After the overproduction, the demand still did not increase. As a result, the prices of those goods declined. However, when the stock market crashed, very few could afford to even buy goods. The same thing happened with farm produce as the farmers planted more wheat than the demand for it.

The president of that time, Herbert Hoover, believed that the government should not get involved in the economy; instead, according to him, the economy could be turned around if they continue to work relentlessly and rely on themselves. He signed the Smoot-Hawley Tariff in 1920 which augmented the tariff rates on imported goods. This did not help at all however. What happened was that foreign countries refused to buy American products. As a result, American producers in terrible need of sales experienced a heavy loss.