WW1 ends – The ending of WW1 meant that the European countries were able to meet their own demands and therefore did not need any more supplies from America. Farmers suffered from overproduction and could not afford to keep their homes or pay mortgages, some farmers even decided to become sharecroppers. In 1924, 600,000 farmers went bankrupt. Also, there was stiff competition from Canadian, Australian and Argentinean farmers who were selling vast amounts of grain to the world market.
Over-production – Fewer products such as cars, consumer good etc were not being sold as factories were making more goods than Americans needed or could afford to buy. As the number of sells went down, the prices of goods also went down which meant that wages had to be kept low. When this did not work, industrialists had to resort to sacking workers, and because the workers did not have any more money, they could not afford luxury so factories continued to cut costs and consequently, more and more people lost their jobs.
Over-speculation – During the 1920’s, the shares on the stock exchange and prices kept rising. Although during 1928, shares did not rise as much as in previous years due to companies not doing so well, so their profits fell. Fewer people were willing to buy their shares and there was a drop in confidence in the market. However, when share prices started rising again, greed took over and speculation recurred.
Availability of Easy Credit – Companies such as Henry Ford introduced hire purchase which meant people could buy goods without paying for the full amount on the spot. With availability to easy credit such as this, people were encouraged to continue buying goods. However, this would only work if the prices continued rising, but when prices started falling problems set in. 75% of the purchase price of shares was borrowed.
Loss in Confidence – Due to the unsteady rates of the share prices, people lost confidence in the Stock Market as they did not want to risk...