Causes of the Stock Market CrashThe 1920's were a time of unbelievable prosperity. The stock market was going through the roof and the United States seemed to have the formula for limitless prosperity. However, the same formula that generated all of that profit would also be the cause of Black Tuesday.
Investment during the 1920's was based on the unstable basis of margin buying. Investors bought borrowed money from their brokers, who went to banks for that money. When stocks failed and investors needed to default, the money was permenantly lost.
However, adding to the crash of '29 was the slowing economy. The desire for consumer durables (expensive items refrigerators, radios, and automobiles) went down as Americans became satisfied with what they had. This in turn affected the companies and workers that produced these items. A downward spiral was set in motion.
Causes of the Stock Market CrashThe crash of 1929 ended the seemingly infinite prosperity of the 1920s. Millionaires had become paupers overnight. Those who believe in the strength of the economic bubble and invested everything they had lost everything they had. Of course, the economy weakened and the unemployment skyrocketed. The Great Depression had begun.
"Black Thursday, October 24, 1929" The New York Times