Three questions:
How did the practice of buying stocks on margin contribute to the crash?? (1900's)
How did the stock market crash provoke a banking crisis??
How did the banking crisis lead to buisiness failures??
!!10 points to whoever answers correctly!!
Thanks
There are many conflicting beliefs as to what caused the great depression.
Some believe that it was the process of moving away from the gold exchange standard to floating exchange rates which prompted the great depression.
There were multiple causes for the first downturn in 1929, including the structural weaknesses and specific events that turned it into a major depression and the way in which the downturn spread from country to country. In terms of the 1929 small downturn, historians emphasize structural factors like massive bank failures and the stock market crash, while economists (such as Peter Temin and Barry Eichengreen) point to Britain's decision to return to the Gold Standard at pre-World War I parities (US$4.86:£1).
I don't think people were buying stocks on margin in that period.
The tightening of credit and loan defaults happened well before the stock market crash – equity was slow to react and the last to fall.
Banks could not extend credit to each other or to any businesses, this meant banks could not obtain loans. As banks collapsed, so did those companies that had their deposits invested in those banks.
Good luck