The Great Depression’s affect on the wall street’s stock market crash which led to bankruptcy among companies.

The Great Depression affected the world economy from October 1929 to 1934. It was a time of great hardship, triggered by the Wall Street Stock Market crash, which caused a drop in worldwide production and prices, resulting in massive unemployment in free market economies throughout the western world.

In October 1929, the prices of the stocks and shares on the New York Stock Market in Wall Street dropped dramatically, precipitating the Great Depression. The crash was caused by panic selling, with a rush of investors suddenly deciding that speculative share prices, which had been climbing since 1927, no longer reflected the real worth of the stocks.

By October 24 – dubbed Black Thursday – 13 million shares had changed hands and by October 29, 16 million shares had changed hands. With many shares bought on credit and sold at any price, fortunes were lost when the bubble burst. Confidence in the American economy plunged overnight, and people began withdrawing their savings from the banks. Many companies then went bankrupt, creating widespread unemployment and depression.

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By 1931 Britain was deep in economic depression inaugurated by Wall Street Crash 1929. Unemployment reached 2.5 million, resulting in sizeable budgetary deficit. European financial crisis began 1931 with threatened collapse of Austrian banking system; collapse averted but crisis spread to Germany. Resulted in drain on British gold reserves, sterling began to look vulnerable, causing withdrawal of foreign funds culminating in run on pound. Government sought loan of £80 million in United States: terms of loan were achievement of balanced budget to restore confidence in sterling, by cutting unemployment benefit (although balanced budget irrelevant to real economic problems of depression). Resulted in formation of National Government.

Companies went bankrupt, factories fell silent, and docks became idle. Many banks collapsed, including around 44 per cent of banks in the US, and hundreds of thousands of ordinary consumers lost all their savings. With one in five of the world’s labor force out of work, millions survived only by eating at soup kitchens, fixing worn shoes with cardboard, and patching their old clothes until the international economy revived in the 1930s.

Courtesy: Webster Encyclopedia