The Crash of 29’
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In 1929 an investor called Will Payne stated that it was so easy to make money on the Wall Street Stock Exchange that it was no longer a gamble. A gamble is when someone loses and someone gains, here everybody was winning. In an article titled Everybody Ought to be Rich, John Jaskob the author proposed a get rich scheme by saying that if $15 per month is invested in stocks then this money can be converted to $80,000 over a period of 20 years. In 1928 President Coolidge said, “No Congress of the US ever assembled on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity.” Just before the 1929 stock market collapse a journalist asked a speculator about the profitability of investing in the stock market. The speculator replied, “One investor buys General Motors at $100″(he meant a GM share) “sells to another at $150, who sells it to a third at $200. Everyone makes money”. From 1925 to 1929, the вЂ?Boom Period’ every share in the stock market seemed to be going up and industrial sector shares more than trebled in price. Stocks of RCA (Radio Corporation of America) were traded at $2 in 1921 and $500 in 1929. This was the magic of the bubble, a bull market in which Keynes вЂ?Animal Spirits’ took over entrepreneurs and speculators. People were buying because everybody was buying shares as a result all and sundry wanted to take part in stock investing. During the 1920s Americans believed in the вЂ?new paradigm’ an era of capitalist upswing and President Calvin Coolidge believed that the prosperity will go on forever. In reality it was the herd instinct of the investors which created panics and rushes in the market. In September 1929 the New York Times recognized the universal fact that what goes up must come down by commenting, “It is a well-known characteristic of boom times that the idea of their old unpleasant way is rarely recognized as such.” (Wall Street Crash) (Brooks, Mick. 1929. Can it happen again? Brooks, Mick. 1929. Can it happen again?)

The new economic era of boom began after the end of World War I. During that timeEurope was struggling to get on its feet and the United States was prospering as a major creditor of the Allied nations. The mass production system was applied to the manufacture of cars and other industrial as well as commercial products. Electricity became available for manufacturing and industrial purposes. Together with numerous inventions and innovations, the advent of electricity and mass production changed the economic outlook of America forever. Wireless technology was introduced to the masses and numerous radio manufacturers and radio stations began operations, General Motors and Ford manufactured cars for the middle class, an aviation industry under Boeing was established; in general, existing companies began to expand and many new companies entered the market. As a result wages began to go up and consumer spending on luxury and comfort goods increased. Americans experienced an unprecedented rise in their standard of living.

From 1920 to 1923 President Warren G. Harding who was a laissez Faire capitalist and Republican advocated and pursued economic policies which were aimed at the reduction of taxes and regulations and allowed unrestricted monopolies to form. As a result of his policies inequality of wealth and income reached record levels. When Calvin Coolidge assumed office in 1923 he allowed the Harding policies of minimal government intervention to continue. Coolidge used to say, �The business of America is business.” During the Coolidge presidency the stock market began its spectacular growth. The top level of tax rates was lowered to just 25% and the Supreme Court made a ruling which further relaxed intervention and control of monopolies by the government. By 1928 inequality of wealth reached such a level that half of the American population was living below the poverty line. When President Hoover came in to office, during the seven months up to the crash of 1929 consumption was down, there was an inventory backlog three times the figure for the preceding year; the construction industry had been experiencing a slump since 1926, inflation was increasing and automobile sales were down by a third. A recession began in August before the crash in October. (Tanner, Neal. Overview: The Great Depression)

Just as the bubble was created by an extremely bullish market the crash and collapse of the market was caused by the reversal of the bubble, a panic selling bearish market. In order to understand how the crash happened and what caused it we have to indulge in some basic economics. The capitalist system of the economy, especially a laissez faire one with minimal governmental intervention depends on

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President Coolidge And Era Of Capitalist Upswing. (April 2, 2021). Retrieved from