History is there to teach us lessons from the mistakes made, and the Wall Street stock market crash of 29 is one that we should always keep in mind.
The stock market has its cycles with its falls and rises, knowing them and having data about their operation helps us to remove those fears when investing in the stock market.
In this article I will tell you a little history, it always comes in handy.
Unfortunately whenever there has been wars in the world, its population has suffered first in their flesh and later in the form of an economic crisis. As for example, the great depression of 29 and the fall of Wall Street.
This came as a consequence of the end of the First World War that, curiously, although it had only developed in some regions of ancient Europe, the crisis that it has unleashed after its end affects the entire planet.
The crash of 29 and the Wall Street stock market crash
The crisis of 29, which was managed between two world wars, had as today the criticism and survival of the capitalist system. This epidemic began in the US and from there it spread to the whole world.
After the First World War, the governments of the different countries of the world hoped to recover that economic prosperity that they had enjoyed until 1914. During the crazy 1920s it seemed that these expectations were being fulfilled, but at the beginning of 1929 it generates a crisis that made prices and economic expectations fall.
The Anglo-Saxon countries, the United States and the United Kingdom, as well as those that had remained neutral in the war, such as Japan, made proposals to have a solid economy based on a stable currency, but they only partially succeeded.
But as a consequence, Germany's monetary system collapses, causing its currency to lose its value and devalue in a way that destroys private savings. Companies had to resort to loans from foreigners in order to survive, a circumstance that places Germany highly dependent on foreign loans.
The situation in the Soviet Union and in the Eastern countries was not very different; but in Poland, Austria and Hungary the currency does not totally lose its value.
Starting in 1924, the crisis was overcome, beginning a new stage of prosperity that revives economic growth despite the fact that unemployment remains high and some prices of raw materials and basic foods once again fall. These economic imbalances lead to a new crisis, but this time, harder than the previous one.
The First World War had favored the United States in a spectacular way, making it the main supplier of raw materials and food and industrial products. It was also the world's main creditor and its power in Europe was fundamental.
The war had brought an important industrial growth (over 15%), being the sectors related to the war industry the most favored.
Agriculture also benefited by making the United States the second largest merchant marine in the world.
The prosperity and growth that began in the early 1920s were much deeper and more stable in the United States. At this time, new industrial sectors were consolidated, such as the electrical industry, chemicals, petrochemicals, aeronautics, automobiles, cinema and radio.
As a consequence of this unprecedented industrial development, the energy system was renewed, mainly due to the increase in the consumption of oil and electricity. Industry became more efficient with the incorporation of Tayiorism and Fordism as new ways of producing and organizing work, and mass production prevailed. New activities were also developed indirectly related to new industries, such as the construction of roads, airports, weekend homes, etc.
Agriculture, on the other hand, did not experience similar growth, since agricultural prices remained below industrial prices, generating an unfavorable imbalance for the primary sector. Faced with this, many peasants sold their lands for less than real value and went to the cities.
However, indefinite prosperity and optimism were spreading everywhere. They were the golden years of consumerism and nationalist exaltation. The goal of being an affluent society was believed to have been reached. The climate of trust resulted in the purchase of shares in industrial companies by a large number of the population, with the New York Stock Exchange being the center of the world economy, where capital from all over the world arrived.
As a comparison with the current crisis, the livestock and agricultural industries have had a serious deterioration, their prices being uncompetitive and their industry highly affected by migration to the cities.
However, on Wall Street everyone invested in the stock market, the baker, the hairdresser, the newspaper boy ... they all bought stocks. They were sold and speculated with great ease. Anyone could be a millionaire in a few days! It was just a matter of investing and waiting.
Towards the end of the decade, stock buying rampant grew by 90%. Financial speculation made money quickly, being the value of the shares fictitious, since they were above their real value (people took out loans in banks and put that same money in the stock market, at a higher interest than what paid)
This is similar to what happened with the crash of the real estate bubble in 2008 and its subsequent decline. We just have to exchange securities for mortgages more properties.
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