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What Makes the Stock Market to Crash ?

When researching the causes of stock market crashes, you should focus on the historical events associated with 1929. This is when the major stock market crash happened because it was resulted by different economic imbalances and structural fails. If you’re interested in this subject, learn more about the most important factors behind this event.

First of all, it’s all about a credit boom at that time. Don’t forget that there was a fast growth in bank loans and credits in this country so that people felt encouraged by economy strengths and decided that the stock market was their own possible way to bet. Some people borrowed money to buy endless shares, while others took loans for expanding their businesses. This means that many of them became highly indebted and more susceptible to changes in confidence. In 1929, those people who borrowed money were exposed and rushed to sell their shares.

Another important factor that contributed to this stock market crash is buying on margins. This practice was related to buying on credits and it’s all about borrowing up to 90% of shares values. Keep in mind that this technique allows people to put more cash in shares whole increasing their value. It’s no wonder there were many margin millionaires at that time because they had incredible profits through buying on margins and watching the increasing prices of shares. However, such investors were highly exposed when prices fell down so that they got wiped out after the stock market crash. Besides, this event also affected those investors and banks that lent money to such millionaires.

Take irrational exuberance into your consideration when thinking about the main causes of this stock market crash. It can be blamed in this situation in addition to people’s false expectations. Before this terrible crash, the stock market offered a huge potential to make high gains so that it fast became a new gold rush for many people. It’s no wonder they kept buying new shares with certain expectations to earn a lot of money. As share prices rose, they started borrowing money to invest in this market more and more so that it got caught up in the so-called speculative bubble. The main problem is that existing stock prices were different from true potential earnings because they were not driven by basic economic fundamentals. However, it wasn’t a last bubble of this kind, and the latest stock market problems prove that.

When researching the causes of stock market crashes, you should focus on the historical events associated with 1929. This is when the major stock market crash happened because it was resulted by different economic imbalances and structural fails. If you’re interested in this subject, learn more about the most important factors behind this event.

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Assignment ID
100001587
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CREATED ON
August 27, 2016
COMPLETED ON
August 28, 2016
Price
$5
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Essay Example Comments
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July 27, 2016
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July 27, 2016
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July 27, 2016
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