The Wall Street Crash — (2/2)

The immediate effects of the Wall Street Crash were intense and widespread. A huge number of investors lost their savings that they had invested into the stock market. These impacts included:

The credit industry

The stock-market crash destroyed the system of credit. Nobody trusted banks or brokerage houses any more, so lending against the security of stocks and shares ended. No creditor was now willing, or could even afford to wait for payment so trade was halted.

The middle class

This figure massively decreased after the Wall Street Crash. Many people in the Middle-Class were forced to sell their assets including clothing, cars and in the worst cases, houses. This was because they were called on for cash so as many of them had bought shares on margin.

The housing industry

The housing industry slumped as people with mortgages could not refinance them, which was easy to do before the Wall Street Crash. Many people could not pay their mortgages and were made homeless in the worst cases. The housing industry and other complimentary industries slumped due to the fall in demand for real estate.

Manufacturing and industry

Many factories were forced to close down after the Wall Street Crash. The sales of new cars slumped from just under 4.5 million in 1929 to 1 million in 1932. This was also felt by other industries who produced industrial products. Reducing shares made it difficult for firms and corporations to borrow money for sustenance of their business.

Employment

This was because many had bought shares on margin and were now called on for cash. Unemployment stood at 1.5 million in 1929, by March 1930 this grew to 3.25 million. This rose to 5 million by the end of 1930, 9 million by 1931 and 13 million by 1932. This caused mass starvation and malnutrition for vast numbers of people within the US. Furthermore, adolescents would take up jobs selling apples offering to shine shoes at railroads. There was humiliation and despair of unpayable bills.

Agriculture

Farm incomes fell by more than 50%. This was because prices were so low, nobody would shift harvests to market. In Oregon sheep were slaughtered and left to the buzzards as farmers couldn’t afford to ship or feed them. Wheat in Montana was left to rot. In Philadelphia one family lived off dandelions.

The Failure of Banks

This was all exacerbated by the failure of the federal reserve to take sufficient action to prevent the banking collapse, raising interest rates, restricting credit. This is the most important as they set up credit rates, invested in stocks and then moved to tight credit. This caused, maintained and popped the stock market bubble, causing the great depression. The behaviour of the central reserve allowed the stock market bubble to grow and picture without fixing the problem after.