The Wall Street Crash started in October 1929. It was one of the largest stock market crashes in the United States, which opened a new page in the development of the American capitalist economy with periodically emerging economic crises. Nobody could predict both this event and the Great Depression followed by it. All Western countries were impacted by the Great Depression, which emerged in the historical period called the Roaring Twenties, when President Calvin Coolidge, who created the “Coolidge Market”, made way for Herbert Hoover, a candidate of the Republican Party from the state of Iowa. It was the most prosperous period for the United States, when Americans were considered as the world’s richest nation because the United Kingdom yielded to it. As Ossian (2011) states, “During the 1920s, Americans played the stock market like ‘get-rich-quick games’, replacing frontier land speculation and gold rushes since they no longer applied in the twentieth century” (p. 22). Thus, the United States became a world economic center.
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Some American historians expected Herbert Hoover to create the “Hoover Market” as logical continuance of the Calvin Coolidge’s economic policy. Some people called this period a New Era with the hope of the further progress of the American economic leadership in the world. Of course, this state of affairs in the American economy was a result of the victory in the World War I, when the American industry developed performing military orders. Such industrial branches as steel production, building construction, automotive industry, railroad transportation, as well as some manufacturing and trading companies increased their profits, for instance, by 36.6 percent in the first half of 1929 as compared to 1928. Besides, the iron and steel industry doubled its profit. Therefore, hundreds of thousands of people became investors in the stock market. According to Blumental (2002), “Out of 121 million people, probably just 1.5 million to 3 million of them owned stocks – just one or two out of every 100 Americans” (p. 4). They borrowed money for buying stocks in the United States. It was a very profitable business because an interest was about five percent. As a matter of fact, the United States was put at a disadvantage in that state of affairs. In addition, it had been lasting for years, and finally, by the fall of 1929, more than 8.5 billion dollars emerged out on loan. That huge sum exceeded the entire monetary amount circulating in the United States. It was one of the most important reasons for the Wall Street Crash in the fall of 1929 with the following Great Depression lasting for years.
President Herbert Hoover did not know how to manage the economic situation emerging in the beginning of his presidency. As Ossian (2011) states, Hoover managed to turn from an orphan boy into a successful person, who was elected by the American people to be their President. Thus, “For the nation’s popular vote, Hoover received 21,385,413 ballots compared to 14,980,718 for Smith, and in Iowa the count had been 623,570 for Hoover, 379,311 for Smith, and 2,960 for the Socialist candidate Norman Thomas” (Ossian, 2011, p.4). Iowans were proud to have their countryman as the President of the United States of America. They hoped that Hoover would improve their economic and social situation because he knew all their problems. First of all, agricultural work was one of the cheapest and the most painstaking jobs in the United States. According to Ossian (2011), “In 1910, an average farm of 160 acres required a capital of 17,000 dollars… In 1920, this figure had increased to 40,000 dollars but decreased somewhat by 1925 to 26,000 dollars” (p. 10). At the same time, agricultural products were very cheap. Thus, farmers hoped that Hoover could establish a five percent return on investments, as it was in the Amerrican industry at that time. In addition, there was an educational gap between rural and urban pupils, which could be explained by the lack of experienced teachers in Iowa’s villages. At the same time, speculation in the rural land was a very profitable business, which became the next reason for the emergence of the economic crash.
According to Galbraith (2009), “Between 1925 and 1929, the member of manufacturing establishments increased from 183,900 to 206,700; the value of their output rose from 60.8 billions to 680 billions” (p. 2). In 1921, the Federal Reserve Bank index was 67, and it became 110 in 1928. By June 1929, it increased to 126. The American industry was developing very fast. As Galbraith states, “In 1926, 4 301 000 automobiles were produced. Three years later, in 1929, production had increased by over a million to 5 358 000” (p. 2). It could be compared to 5 700 000 cars in 1953. At the same time, Galbraith attracts attention to the fact that three governors of the largest European banks, namely, Montagu Norman, Hjalmaar Schacht, and Charles Rist, “came to the United States to urge an easy money policy” (p. 10). As a result, the Federal Reserve had to pay interests, and “the rediscount rate of the New York Federal Reserve Bank was cut from 4 to 3.5 percent. Government securities were purchased in considerable volume” (p. 10). Thus, banks and individuals were left with no money to spare. It was the most dangerous error in the American history, because people could only exchange by stocks, which had turned into pieces of paper. It caused the famous Wall Street Crash on October 29, 1929.
The Wall Street Crash emerged due to economic errors and the American government proved to be unable to manage the situation. Moreover, foreign bankers undermined the American financial system, and it caused the crash and the Great Depression lasting for years.