The Main Cause Of Amadeo's Financial Crisis

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The main cause of the crisis was that capitalism was no longer a self-regulating system. Another issue was the overproduction of goods that followed a period of prosperity and the growth of the national economy. The presence of large capital acted outside the framework of national regulation and the spontaneous development of the market led to the production of goods, including items that the market could not digest. The population’s purchasing power did not match the number of goods that were produced and presented on the market. As a result, the market collapsed. The second reason was the financial speculation. The financial market developed, because of stock trading growth. This process occurred beyond the governmental control. As a result…show more content…
citizens, obsessed with the rapid enrichment, invested all their savings in corporate stocks in order to subsequently sell them more. Americans continued purchasing shares them in the hope to get more money in the future. Investors actively took out loans to buy securities. The public obsession with buying more and more shares produced bubble, which, according to the laws of the economy, would sooner or later have to burst. A few months before the stock market downturn, the national economy was slipping into recession. Industrial production, wholesale prices and household incomes decreased. During the black days of October 1929, over 30 million securities were sold (Amadeo). Due to the exchange crash, thousands of investors lost their funds. Overall losses were almost $30 billion (Amadeo). Following the bankrupt shareholders, banks began to close, actively issuing loans for the purchase of securities. After the exchange panic, they admitted that they could not repay debts. After bankruptcies of financial institutions, collapse of enterprises was inevitable. They lost possibility to receive loans. As a result, factories and other organizations could not operate further. The consequence of a large-scale bankruptcy of enterprises was a huge increase in…show more content…
It began with the world economic crisis in 1929 that affected the American nation the most. The crisis of overproduction of goods provoked the Great Depression. At that time, commodities/goods/items could not be bought because of the limitation of money supply - dollars were tied to the gold reserve. The end of the First World War played an important role in boosting the severe economic crisis. The fact was that the U.S. economy was heavily dependent on defense orders, and, after the end of the war, their number decreased, which led to a recession in the American military-industrial complex. Inadequate monetary policy conducted by the U.S. Federal Reserve System in the 1930s and an increase of duties on imported goods are often cited as other fundamental causes of the Great

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