Speculation in the Wall Street Crash

Speculation was a form of gambling on the stock market, speculators bought only 10% of the original value of stocks and bought the rest with borrowed money from banks. These speculators did not hold on to their shares for very long and would sell a soon as their stock value increased. These speculators kept borrowing more money so they could buy more shares and sell them when prices had gone up again. There were many firms, which were not safe investments, which floated shares, but people still bought them anyways, they expected for prices to naturally rise. There were 600,000 speculators in 1929.

The American economy was doing very well. It was doing so well that they were more share buyers than sellers and the value of shares was rising. In 1928 speculation finally took-off, demand for shares was at an all-time high and prices were rising at an alarming rate. One thing that kept the system together was confidence; if people are confident that prices will keep rising there will be more buyers than sellers. However, if people think that prices might stop rising or start to drop, all of a sudden there will be more sellers and then the whole system crashes.

But then again, speculation wasn’t the only thing responsible for the Wall Street Crash though it did connect to all the other things that were responsible for it. There was poor distribution between the rich and the poor. The problem was that the rich were making millions but the poor were making almost nothing. There was also an unfair distribution of wealth, which consequently led to the Wall Street Crash. A major cause of the depression was the inequality of wealth in America. There were some extremely rich people, and huge numbers of extremely poor people at the same time.